Real Property Mbe

Front 1

Estates in Land: Present Possessory Estates

Back 1

A present possessory estate is an interest that gives the holder the right to present possession.

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Estates in Land: Present Possessory Estates: Fee Simple Absolute

Back 2

A fee simple absolute is the largest estate recognized by law. It can be sold, divided, devised or inherited and has an indefinite or potentially INFINITE DURATION. Today, a fee simple is presumed in the absence of express contrary intent (words of inheritance are no longer necessary).

Front 3

Estates in Land: Present Possessory Estates: Defeasible Fees

Back 3

Defeasible fees are fee simple estates (i.e., of uncertain or potentially infinite duration) that can be terminated upon the happening of a stated event.

Front 4

Estates in Land: Present Possessory Estates: Defeasible Fees: Fee Simple Determinable (and Possibility of Reverter)

Back 4

A fee simple determinable terminates upon the happening of a stated event and AUTOMATICALLY REVERTS to the grantor. It is created by durational language, such as “for so long as,” “while,” “during” or “until.” A fee simple determinable can be conveyed, but the grantee takes subject to the estate’s being terminated by the specified event.

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Exam Tip

Back 5

Remember that statements of motive or purpose do not create a determinable fee. To create a fee simple determinable, words limiting the DURATION of the estate must be used. Watch for grants such as “for purpose of” and “to be used for”; they are merely expressions of motive.

Front 6

Estates in Land: Present Possessory Estates: Defeasible Fees: Fee Simple Determinable (and Possibility of Reverter): Correlative Future Interest in Grantor—Possibility of Reverter

Back 6

Whenever a grantor conveys a fee simple determinable, he AUTOMATICALLY retains a possibility of reverter, which is a reversionary future interest. A possibility of reverter is transferable, descendible, and devisable.

Front 7

Estates in Land: Present Possessory Estates: Defeasible Fees: Fee Simple Subject to Condition Subsequent (and Right of Entry)

Back 7

A fee simple subject to a condition subsequent is an estate in which the grantor RESERVES THE RIGHT TO TERMINATE the estate upon the happening of a stated event; i.e., the estate does not automatically terminate—the grantor must take some action. The estate is created by use of conditional words, such as “upon condition that,” “provided that,” “but if,” and “if it happens that.”

Front 8

Estates in Land: Present Possessory Estates: Defeasible Fees: Fee Simple Subject to Condition Subsequent (and Right of Entry): Correlative Future Interest in Grantor—Right of Entry

Back 8

The right to terminate, reserved by the grantor, is called a right of entry. It must be EXPRESSLY RESERVED; in contrast with a possibility of reverter, it does not arise automatically. Some courts hold that rights of entry are not transferable inter vivos, but most states agree they are devisable, and all states agree they are descendible.

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Exam Tip

Back 9

A conveyance that contains both durational language AND a power of termination will likely be construed as creating a fee simple subject to a condition subsequent, because the forfeiture is OPTIONAL at the grantor’s election rather than automatic. Policy disfavors forfeiture of estates.

Front 10

Estates in Land: Present Possessory Estates: Defeasible Fees: Fee Simple Subject to an Executory Interest

Back 10

If a fee simple estate terminates upon the happening of a stated event (because it is determinable or subject to a condition subsequent) and then passes to a third party rather than reverting to the grantor or giving the grantor a right to terminate, the third party has an executor interest.

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Estates in Land: Present Possessory Estates: Defeasible Fees: Conditions and Limitations Violating Public Policy

Back 11

Conditions or limitations that violate public policy generally are struck down, and the grantee takes free of the restraint. If the purpose of the condition is to PENALIZE MARRIAGE or encourage divorce, it likely will be struck down. However, if the purpose is to GIVE SUPPORT until marriage or in the event of divorce, it likely will be upheld.

Front 12

Estates in Land: Present Possessory Estates: Fee Tail

Back 12

The fee tail is an estate where INHERITABILITY IS LIMITED TO LINEAL HEIRS. It is created by the words “to A and the heirs of his body.” Most jurisdictions have abolished the fee tail, and an attempt to create one results in a FEE SIMPLE.

Front 13

Estates in Land: Present Possessory Estates: Life Estate

Back 13

A life estate is one MEASURED BY THE LIFE or lives of one or more persons. It may be created operation of law (e.g., dower) or by conveyance.

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Estates in Land: Present Possessory Estates: Life Estate: Life Estates by Marital Right (Legal Life Estates)

Back 14

Dower and curtesy were the common law interests of a spouse in the real property of the other spouse. These interests could not be defeated by conveyance or by creditors. Most states have abolished dower and curtesy in favor of statutory right to a portion of a spouse’s estate.

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Estates in Land: Present Possessory Estates: Life Estate: For Life of Grantee

Back 15

The usual life estate is measured by the life of the grantee (e.g., “to A for life”). This type of life estate may be implied from language such as “to B after the life of A.”

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Estates in Land: Present Possessory Estates: Life Estate: Life Estate Pur Autre Vie (Life of Another)

Back 16

A life estate “pur autre vie” is measured by a life OTHER THAN THE GRANTEE’S (e.g., “to A for the life of B”). A life estate pur autre vie also results when the LIFE TENANT CONVEYS his life estate to another (e.g., if A, the holder of a life estate, conveys his interest to B, B has a life estate for the life of A).

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Exam Tip

Back 17

Although a life estate is usually indefeasible (i.e., it ends only when the life tenant dies), it is possible to create life estates that are defeasible in the same ways that fee estates can be defeasible. A life estate can be determinable, subject to a condition subsequent, and subject to an executor interest (e.g., “to A for life so long as alcohol is not used on the premises” or “to A for life, but if A is divorced, to B”).

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Estates in Land: Present Possessory Estates: Life Estate: Rights and Duties of Life Tenant—Doctrine of Waste

Back 18

A life tenant is entitled to any ORDINARY uses and profits of the land but cannot do anything that injures the interests of a remainderman or reversioner. A future interest holder may sue for damages or to enjoin such acts, and if she spends money to perform the life tenant’s obligations, she is entitled to reimbursement.

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Estates in Land: Present Possessory Estates: Life Estate: Rights and Duties of Life Tenant—Doctrine of Waste: Affirmative (Voluntary) Waste—Natural Resources

Back 19

Exploitation of natural resources (e.g., minerals) by a life tenant is generally limited to situations when:
1. Necessary for REPAIR OR MAINTENANCE of the land;
2. The land is SUITABLE ONLY FOR SUCH USE; or
3. It is expressly or impliedly PERMITTED BY THE GRANTOR.

Under the open mines doctrine, if mining was done on the land prior to the life estate, the life tenant can continue mining—but is limited to the mines ALREADY OPEN.

Front 20

Estates in Land: Present Possessory Estates: Life Estate: Rights and Duties of Life Tenant—Doctrine of Waste: Permissive Waste

Back 20

A life tenant is obligated to:
1. Preserve the LAND AND STRUCTURES IN A REASONABLE STATE OF REPAIR;
2. Pay INTEREST on mortgages (not principal);
3. Pay ORDINARY TAXES on the land; and
4. Pay SPECIAL ASSESSMENTS for public improvements OF SHORT DURATION (improvements of long duration are apportioned between the life tenant and future interest holder).

Permissive waste occurs when a life tenant fails to do so. However, this duty is LIMITED to the extent of the income or profits generated from the land (or to its reasonable rental value, if there is no income or profit). A life tenant is NOT obliged to insure the premises for the benefit of remaindermen and is not responsible for damages caused by a third-party tortfeasor.

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Estates in Land: Present Possessory Estates: Life Estate: Rights and Duties of Life Tenant—Doctrine of Waste: Ameliorative Waste

Back 21

Ameliorative waste is a change that BENEFITS the property economically. This waste was actionable at common law, but now a life tenant may alter or even demolish existing buildings if:
1. The market value of the future interests is not diminished; and EITHER
2. The remaindermen do not object; OR
3. A substantial and permanent change in the neighborhood conditions (e.g., change from residential to 90% industrial) has deprived the property in its current form of reasonable productivity or usefulness.

Front 22

Estates in Land: Present Possessory Estates: Life Estate: Rights and Duties of Life Tenant—Doctrine of Waste: Ameliorative Waste: Compare—Leasehold Tenant

Back 22

Leasehold tenants remain liable for ameliorative waste even if the neighborhood has changed and the market value of the premises was increased.

Front 23

Estates in Land: Present Possessory Estates: Life Estate: Rights and Duties of Life Tenant—Doctrine of Waste: Ameliorative Waste: Compare—Worthless Property

Back 23

If the land is practically worthless in its present state, the life tenant may seek a partition sale, the proceeds of which are put in trust with income paid to the life tenant.

Front 24

Estates in Land: Present Possessory Estates: Life Estate: Renunciation of Life Estate

Back 24

If a life tenant who receives the estate by will or intestacy renounces his interest, the future interest following the life estate is generally accelerated so that it becomes immediately possessory.

Front 25

Estates in Land: Future Interests

Back 25

A future interest gives its holder the right or possibility of FUTURE possession of an estate. It is a PRESENT, legally protected right in property.

Front 26

Estates in Land: Future Interests: Reversionary Interests—Future Interests in Transferor: Reversions

Back 26

A reversion is the estate left in a grantor who conveys less than she owns (e.g., O conveys “to A for life”; O has a reversion). It arises by operation of law; it does not have to be expressly reserved. A reversion is alienable, devisable, and inheritable. Its holder can sue for waste and for tortious damage to the reversionary interest.

Front 27

Exam Tip

Back 27

All reversionary interests are VESTED and, thus, not subject to the Rule Against Perpetuities.

Front 28

Estates in Land: Future Interests: Remainders

Back 28

A remainder is a future interest IN A THIRD PERSON that can become possessory on the NATURAL EXPIRATION of the preceding estate. It cannot divest a prior estate, and it cannot follow a time gap after the preceding estate. A remainder must be EXPRESSLY CREAATED in the instrument creating the preceding possessory estate.

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Exam Tip

Back 29

Because a remainder cannot “cut short” a preceding estate, it can NEVER FOLLOW A FEE SIMPLE estate, which is of potentially infinite duration. Executory interests are the future interests that cut short preceding estates or follow a gap after them.

Front 30

Estates in Land: Future Interests: Remainders: Indefeasibly Vested Remainder

Back 30

A vested remainder is one created in an EXISTING AND ASCERTAINED person, and NOT SUBJECT TO A CONDITION PRECEDENT. The remainderman has a right to immediate possession upon normal termination of the preceding estate. An INDEFEASIBLY vested remainder is a vested remainder that is not subject to divestment or dimunition.

Front 31

Estates in Land: Future Interests: Remainders: Vested Remainder Subject to Open

Back 31

This is a vested remainder created in a class of persons (e.g., “children”) that is certain to become possessory, but is SUBJECT TO DIMUNITION—e.g., by the birth of additional persons who will share in the remainder as a class.

Front 32

Estates in Land: Future Interests: Remainders: Vested Remainder Subject to Total Divestment

Back 32

This is a vested remainder that is subject to a CONDITION SUBSEQUENT.

Example: O conveys “to A for life, then to B and his heirs; but if B dies unmarried, then to C and his heirs.” B has a vested remainder subject to complete divestment by C’s executor interest.

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Exam Tip

Back 33

Where language is ambiguous, the preference is for vested remainders subject to divestment rather than contingent remainders or executor interests. Policy favors early vesting of estates.

Front 34

Estates in Land: Future Interests: Remainders: Contingent Remainder

Back 34

Contingent remainders are those created in UNBORN OR UNASCERTAINED persons, or SUBJECT TO A CONDITION PRECEDENT.

Front 35

Estates in Land: Future Interests: Remainders: Contingent Remainder: Subject to Condition Precedent

Back 35

A condition is precedent if it must be satisfied before the remainderman has a right to possession.

Examples: 1. O conveys “to A for life, then to B and his heirs IF B marries C.” B’s remainder is contingent because he must marry C before he can take possession.

2. O conveys “to A for life, then to B and his heirs if B marries C, otherwise to D and his heirs.” B and D have ALTERNATIVE CONTINGENT REMAINDERS.

Compare: O conveys “to A for life, then to B and his heirs; but if B marries C, then to D and his heirs.” B has a vested remainder (because no condition precedent) subject to divestment by D’s executor interest.

Front 36

Estates in Land: Future Interests: Remainders: Contingent Remainder: Unborn or Unascertained Persons

Back 36

A remainder created in unborn or unascertained persons is contingent because until the remaindermen is ascertained, no one is ready to take possession if the preceding estate ends.

Example: O conveys “to A for life, then to children of B.” If B is childless at the time, the remainder is contingent.

Front 37

Estates in Land: Future Interests: Remainders: Contingent Remainder: Destructibility of Contingent Remainders

Back 37

At common law, a contingent remainder was destroyed if it failed to vest before or upon the termination of the preceding freehold estate.

Example: O conveys “to A for life, then to B if she reaches age 21.” If A dies before B reaches age 21, B’s remainder is destroyed.

Most states have abolished the destructibility rule. In those states, B’s interest in the above example would be converted to an executor interest upon A’s death because it will divest O’s reversionary estate when B turns 21.

Front 38

Estates in Land: Future Interests: Remainders: Contingent Remainder: Destructibility of Contingent Remainders: Related Doctrine of Merger

Back 38

When one person acquires all of the present and future interests in land except a contingent remainder, under the common law, the contingent remainder is destroyed.

Example: O conveys “to A for life, then to B’s children.” If, before B has any children, O purchases A’s life estate, O will have a life estate pur autre view and a reversion. These interests merge, and the contingent remainder in B’s unborn children is destroyed.

Front 39

Exam Tip

Back 39

When considering whether estates merge to destroy a contingent remainder, remember that if the life estate and the next vested interest were CREATED BY THE SAME INSTRUMENT, there is no merger. (This would defeat the grantor’s obvious intent.) Merger MAY occur only as in the example above, when one person later acquires immediately successive estates.

Front 40

Estates in Land: Future Interests: Remainders: Rule in Shelley’s Case (Rule Against Remainders in Grantee’s Heirs)

Back 40

At common law, if the same instrument created a life estate in A and gave the remainder only to A’s heirs, the remainder was not recognized, and A took the life estate AND the remainder.

Example: O conveys “to A for life, then to B for life, then to the heirs of A.” The Rule transforms the remainder in A’s heirs into a remainder in a. (No merger, however, because the remainder for life in B is VESTED.)

The Rule in Shelley’s Case has been abolished in most cases.

Front 41

Estates in Land: Future Interests: Remainders: Doctrine of Worthier Title

Back 41

Under the Doctrine of Worthier Title (“DOWT”), a remainder in the grantor’s heirs is invalid and becomes a reversion in the grantor.

Example: O grants Blackacre “to A for life, then to heirs of O.” Under DOWT, A has a life estate, and O has a reversion.

DOWT is generally treated as a RULE OF CONSTRUCTION (i.e., it does not apply if an intent to create a remainder in heirs has been clearly manifested). DOWT applies only to inter vivos transfers (not wills), and only if the word “heirs” is used.

Front 42

Estates in Land: Future Interests: Executory Interests

Back 42

Executory interests are future interests in third parties that either DIVEST a transferee’s preceding freehold estate (“shifting interests”), or FOLLOW A GAP in possession or CUT SHORT a grantor’s estate (“springing interests”).

Examples: 1. In a grant from O “to A and his heirs when A marries B,” A has a SPRINGING executor interest because it divests the grantor’s estate.

2. In a grant from O “to A for life, then to B and his heirs; but if B predeceases A, then to C and his heirs,” C has a SHIFTING executory interest because it divests a transferee’s preceding estate.

Executory interests are not considered vested and thus are subject to the Rule Against Perpetuities, but executory interests are not destructible.

Front 43

Exam Tip

Back 43

Remember that if a third party’s future interest does NOT FOLLOW THE NATURAL TERMINATION of the preceding estate, it must be an executor interest; a remainder cannot follow a fee simple estate.

Front 44

Estates in Land: Future Interests: Transferability of Remainders and Executory Interests

Back 44

Vested remainders are fully transferable, descendible and devisable. At common law, contingent remainders and executory interests were not transferable inter vivos, but most courts today hold that they are freely transferable. Contingent remainders and executory interests are descendible and devisable, provided survival is not a condition to the interest’s taking.

Front 45

Exam Tip

Back 45

Any future interest that is transferable is subject to involuntary transfer; i.e., it is reachable by creditors.

Front 46

Estates in Land: Future Interests: Class Gifts

Back 46

A “class” is a group of persons having a common characteristic (e.g., children, nephews). The share of each member is determined by the number of persons in the class. A class gift of a remainder may be vested subject to open (where at least one group member exists) or contingent (where all group members are unascertained).

Front 47

Estates in Land: Future Interests: Class Gifts: When the Class Closes—The Rule of Convenience

Back 47

Under the rule of convenience, in the absence of an express contrary intent, a class closes (i.e., no one born after that time may share in the gift) WHEN SOME MEMBER OF THE CLASS CAN CALL FOR DISTRIBUTION of her share of the class gift.

Examples: 1. T’s will devises property to W for life, then to A’s children. At the time the will is executed, A has two children, B and C. A then has another child, D. T dies. A has child E, then W dies. After W’s death, A has another child, F. The class closed at W’s death because it was time to make the distribution. Thus, B, C, D, and E share the property, and F is excluded.

2. T’s will devises the residue of his estate “to those of A’s children who attain age 21.” If any of A’s children is 21 at T’s death, the class closes at that time. Otherwise it closes when one of A’s children reaches age 21. But remember, if it had been a future gift (i.e., “to A for life then to such of A’s children who attain age 21”), the class would remain open until the life tenant’s deat

Front 48

Exam Tip

Back 48

Recall that persons in gestation at the time the class closes are included in the class.

Front 49

Estates in Land: Future Interests: Class Gifts: Survival

Back 49

Survival of a class member to the time of closing is usually unnecessary to share in a future gift—UNLESS survival was made an express condition (e.g., “to A for life and then to his SURVIVING children”). However, certain terms are construed to create IMPLIED survivorship conditions (e.g., widow, issue, heirs, next of kin).

Front 50

Exam Tip

Back 50

Generally, when the instrument creating a gift of a future interet in an open class becomes effective, existing class members have a vested remainder subject to open. But watch for a condition precedent, which will prevent the remainder from vesting. For example, “to A for life, remainder to those of B’s children who survive A” creates a contingent remainder in B’s children even if they are in existence—and even if B is dead—because the remainder is contingent on surviving A.

Front 51

Trusts

Back 51

A trust is a fiduciary relationship wit respect to specific property (RES) wherein the TRUSTEE holds legal title to the property subject to enforceable equitable rights in a BENEFICIARY. The creator if a trust is the SETTLOR, who must own the property at the time of the trust creation and must have had the INTENT to create the trust.

Front 52

Trusts: Application of Rule Against Perpetuities

Back 52

The Rule Against Perpetuities applies to the equitable future interests of the beneficiaries in a private trust just as it does to “legal” future interests.

Front 53

Trusts: Creation of Trusts

Back 53

A trust can be created by will (testamentary trust), inter vivos transfer of the trust res, or inter vivos declaration that the settlor is holding property in trust. All trusts of real property must be in writing. Note that a settlor may bequeath (by will) property to a trust created during his lifetime—i.e., he may “pour it over” into the trust.

Front 54

Trusts: Charitable Trusts

Back 54

A charitable trust must have a charitable purpose. The rules governing charitable trusts differ from those applicable to private trusts in three important ways:
1. A charitable trust must have INDEFINITE BENEFICIARIES;
2. It may be PERPETUAL (i.e., the Rule Against Perpetuities does not apply); and
3. The CY PRES DOCTRINE, which allows a court to select an alternative charity when the purpose of the settlor becomes impracticable or impossible, applies.

Charitable trusts may be enforced by an action of the attorney general of the state.

Front 55

Exam Tip

Back 55

Remember that the Rule Against Perpetuities does apply to a shift from a private to charitable use or a charitable to private use.

Front 56

The Rule Against Perpetuities

Back 56

No interest in property is valid unless it must vest, if at all, not later than 21 YEARS AFTER SOME LIFE IN BEING (“measuring life”) at the creation of the interest. If there is ANY POSSIBILITY that the interest might vest more than 21 years after a life in being, the interest is void. The Rule applies to contingent remainders, executory interests, vested remainders subject to open (class gifts), options to purchase (not attached to a leasehold), rights of first refusal, and powers of appointment.

Front 57

The Rule Against Perpetuities: When Perpetuities Period Begins to Run

Back 57

The time the interest is created and the perpetuities period begins to run depends on the instrument and the interest created: For interests granted by WILL, it runs from the date of the TESTATOR’S DEATH; for DEEDS, it is the date of DELIVERY. The period runs on an IRREVOCABLE TRUST from the date it is CREATED; it runs on a REVOCABLE TRUST from the date it BECOMES IRREVOCABLE.

Front 58

The Rule Against Perpetuities: “Must Vest”

Back 58

An interest vests for purposes of the Rule when it becomes:
1. Possessory, or
2. An indefeasibly vested remainder or a vested remainder subject to total divestment.

Front 59

Exam Tip

Back 59

In analyzing Rule Against Perpetuities problems, keep in mind that the key is when the interest COULD POSSIBLY VEST—not when it is likely to vest or even when it did. You must examine the grant as of the time of its CREATION and be sure that if the interest vests it will be within the period of the Rule (i.e., life in being plus 21 years). If there is ANY possibility that it could vest beyond the period, it is void.

Front 60

The Rule Against Perpetuities: “Lives in Being”

Back 60

Unless other measuring lives are specified, one connected with the vesting of the interest is used. Any lives may be denominated measuring lives, provided they are HUMAN and of reasonable number.

Front 61

The Rule Against Perpetuities: Interests Exempt from Rule

Back 61

Except for vested remainder subject to open, the Rule Against Perpetuities does not apply to vested interests. Thus, other vested remainders, reversions, possibilities of reverter, and rights of entry are not subject to the Rule. Moreover, there is a CHARITY-TO-CHARITY exception to the Rule (i.e., the Rule does not apply to any disposition over from one charity to another), and an exception for options to purchase HELD BY A CURRENT TENANT.

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Exam Tip

Back 62

Remember that the Rule Against Perpetuities applies ONLY to CONTINGENT remainders, EXECUTORY INTERESTS, vested remainders SUBJECT TO OPEN, and in most states, OPTIONS TO PURCHASE. Thus, the GRANTOR’S INTERESTS (reversions, possibilities of reverter, rights of entry) are safe from the Rule; you don’t need to consider them.

Front 63

The Rule Against Perpetuities: Consequence of Violating Rule—Offensive Interest Stricken

Back 63

Violation of the Rule destroys only the offending interest. The exception is the rare case of “infectious invalidity” where the testator would probably have preferred the entire gift to fail.

Front 64

The Rule Against Perpetuities: Common Pitfall Cases: Executory Interest Following Defeasible Fee

Back 64

Generally, an executory interest that follows a defeasible fee (e.g., “to A for so long as no liquor is consumed on the premises, then to B”) violates the Rule Against Perpetuities, and the executory interest is stricken. (An executory interest following a defeasible fee is valid only if the condition is specific to the fee holder or expressly limited to the perpetuities period.)

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Exam Tip

Back 65

When a void interest is stricken, the interests are classified as if the void interest was never there. For example, if O conveys “to A for as long as no liquor is consumed on the premises, then to B,” B’s interest would be stricken, A would have a fee simple determinable, and O would have a possibility of reverter. In contrast, if O conveys “to A, but if liquor is ever consumed on the premises, then to B,” B’s interest and the condition are stricken, and A has a fee simple absolute.

Front 66

The Rule Against Perpetuities: Common Pitfall Cases: Age Contingency Beyond Age Twenty-One in Open Class

Back 66

A gift to an open class conditioned on members surviving beyond age 21 violates the Rule.

Example: “To A for life, then to those of A’s children who attain the age of 25.” The remainder in A’s children violates the Rule and is void.

Some states have enacted perpetuities reform legislation that reduces such age contingencies to 21.

Front 67

The Rule Against Perpetuities: Common Pitfall Cases: Fertile Octogenarian

Back 67

A woman is conclusively presumed to be capable of bearing children, regardless of her age or medical condition.

Example: “To A for life, then to A’s children for life, then to A’s grandchildren in fee.” The remainder in A’s grandchildren is invalid despite the fact that A is 80 years old.

Front 68

The Rule Against Perpetuities: Common Pitfall Cases: Unborn Widow or Widower

Back 68

Because a person’s widow (or widower) is not determined until his death, it may turn out to be someone who was not in being at the time of the disposition.

Example: O conveys “to A for life, then to A’s widow for life, then to A’s surviving ISSUE in fee.” In the absence of a statute to the contrary, the gift to A’s issue is invalid because A’s widow might be a spouse who was not in being when the interest was created.

Compare: A remainder “to A’s CHILDREN” would be valid because, unlike issue, they would be determined at A’s death.

Where necessary to sustain a gift, a few state statutes raise a presumption that any reference to a person’s spouse, widow, or widower is to a person in being at the time of the transfer.

Front 69

The Rule Against Perpetuities: Common Pitfall Cases: Administrative Contingency

Back 69

A gift conditioned on an administrative contingency (e.g., admission of will to probate) violates the Rule.

Example: A gift “to my issue surviving at the distribution of my estate” is invalid because the estate might be administered beyond the period of the Rule.

A few state reform statutes eliminate this problem by raising a presumption that the transferor intended that the contingency should occur, if at all, within 21 years.

Front 70

The Rule Against Perpetuities: Common Pitfall Cases: Options and Rights of First Refusal

Back 70

Generally, an option to purchase or right of first refusal that is structured so that it might be exercised later than the end of the perpetuities period is void. (A significant minority of courts will construe the option as lasting only for a reasonable time.) Exception: The Rule Against Perpetuities does not apply to options to purchase held by the current lessee.

Example: When O conveys Blackacre to A, he includes a clause in the deed that states, “A, his heirs, and assign promise that upon finding a ready, willing, and able buyer for Blackacre, Blackacre will be offered to O, his heirs, or assigns on the same terms.” This right of first refusal can be exercised well beyond a life in being plus 21 years, and thus violates the Rule.

Front 71

Exam Tip

Back 71

Watch for a fact pattern on the exam where a tenant has an option to purchase beyond the perpetuities period. Remember that the Rule does not apply to such an option held by a CURRENT tenant or his assignee, but it does apply to a former tenant and to any party to whom the current tenant might transfer the option separately from the lease (in jurisdictions permitting such a transfer).

Front 72

The Rule Against Perpetuities: Application of the Rule to Class Gifts: “Bad-as-to-One, Bad-as-to-All” Rule

Back 72

If the internet of any class member may vest too remotely, the whole class gift fails. For the class gift to vest, the CLASS MUST BE CLOSED and ALL CONDITIONS PRECEDENT MUST BE SATISFIED for every member.

Front 73

The Rule Against Perpetuities: Application of the Rule to Class Gifts: “Gift to Subclass” Exception

Back 73

Each gift to a subclass may be treated as a separate gift under the Rule.

Example: “Income to A for life, then to A’s children for their lives. Upon the death of each of A’s children, the corpus is to be distributed to that child’s issue, per stirpes.” The gifts to each of A’s children’s issue are considered separately. Thus, the gifts to issue of A’s children living at the time of the disposition are good, but the gifts to the issue of afterborn children of A violate the Rule and are void.

Front 74

The Rule Against Perpetuities: Application of the Rule to Class Gifts: Per Capita Gift Exception

Back 74

A gift of a fixed amount to each member of a class is not treated as a class gift under the Rule.

Example: “1,000 to each of my great-grandchildren, whether born before or after my death.” This creates gifts to individuals, each of whom is judged separately under the Rule.

Front 75

The Rule Against Perpetuities: Statutory Reforms

Back 75

In most states, statutes modify the Rule Against Perpetuities. “Wait and See” statutes determine an interest’s validity upon the termination of the preceding life estate—if the interest ACTUALLY vests or fails within the perpetuities period, it is good; if it does not, it is void. Some states have statutes dealing with the common pitfall cases. Other statutes, including the Uniform Statutory Rule Against Perpetuities, provide alternative vesting periods (e.g., 90 years). Some allow court reformation of invalid interests to carry out the donor’s general intent (e.g., cy pres). These reforms are irrelevant for bar exam purposes unless referred to in the question.

Front 76

The Rule against Restraints on Alienation

Back 76

Generally, any restriction on the transferability of a legal (as opposed to equitable) interest is void.

Front 77

The Rule against Restraints on Alienation: Types of Restraints on Alienation

Back 77

There are three types of restraints on alienation:
1. DISABLING restraints, under which attempted transfers are ineffective;
2. FORFEITURE restraints, under which an attempted transfer forfeits the interest; and
3. PROMISSORY restraints, under which an attempted transfer breaches a covenant.

A disabling restraint on ANY legal interest is VOID.

Front 78

The Rule against Restraints on Alienation: Restraints on a Fee Simple

Back 78

All absolute restraints on fee simple estates are void; thus, the grantee may freely transfer the property. However, restraints on fee simple estates for a LIMITED TIME and REASONABLE PURPOSE may be upheld (e.g., a restraint limited to the joint lifetimes of co-owners as a reasonable way to ensure that neither will have to reside with a stranger).

Front 79

The Rule against Restraints on Alienation: Restraints on a Fee Simple: Discriminatory Restraints

Back 79

Judicial enforcement of restraints prohibiting the transfer or use of property to or by a person of a specified racial, religious, or ethnic group is DISCRIMINATORY STATE ACTION forbidden by the Fourteenth Amendment. Discriminatory restrictions may also violate the Fair Housing Act.

Front 80

The Rule against Restraints on Alienation: Restraints on a Life Estate

Back 80

Forfeiture and promissory restraints on life estates are valid, but disabling restraints are void.

Front 81

Exam Tip

Back 81

Remember that the Rule Against Restraints on Alienation applies only to legal interests. Restraints on the alienation of EQUITABLE interests (e.g., spendthrift clauses in trust instruments) are valid.

Front 82

The Rule against Restraints on Alienation: Restraints on Future Interests

Back 82

Restraints on VESTED future interests generally are valid to the extent that restraints on present interests of the same type are valid (e.g., forfeiture and promissory restraints on vested remainders for life are valid, but disabling restraints on vested remainders for life are void).

Front 83

The Rule against Restraints on Alienation: Other Valid Restraints on Alienation

Back 83

The following are valid restraints on alienation:
1. Reasonable restrictions in commercial transactions;
2. Rights of first refusal; and
3. Restrictions on assignment and sublease of leaseholds (e.g., requiring landlord’s consent).

Front 84

Concurrent Estates

Back 84

An estate in land can be held concurrently by several persons, all of whom have the right to enjoyment and possession of the land.

Front 85

Concurrent Estates: Joint Tenancy

Back 85

A joint tenancy’s distinguishing feature is the RIGHT OF SURVIVORSHIP. When one joint tenant dies, the property is FREED from her concurrent interest (her survivors do not succeed to it).

Front 86

Concurrent Estates: Joint Tenancy: Creation

Back 86

The common law requires four unities—TIME, TITLE, INTEREST, POSSESSION—to create a joint tenancy; i.e., the interests of joint tenants must be EQUAL in every way. They must take INDENTICAL interests, at the SAME TIME, by the SAME INSTRUMENT, with the SAME RIGHT TO POSSESSION. Thus, all interests in a joint tenancy must be equal shares. If there are three joint tenants, they each own an undivided one-third interest. In a tenancy in common, by contrast, equal shares are presumed, but are not required. For example, in a tenancy in common held by three parties, one tenant may own a two-thirds undivided interest while each of the other two tenants hold an undivided one-sixth share. In addition, modern law requires a clear expression of a right of survivorship; otherwise a conveyance to two or more persons is PRESUMED TO BE A TENANCY IN COMMON.

Front 87

Exam Tip

Back 87

If the bar examiners tell you in the question that the parties are joint tenants, take it as given that they are joint tenants with right of survivorship. In this situation, DO NOT apply the presumptions that any conveyance to two or more persons is a tenancy in common. The bar examiners are NOT testing your knowledge of that presumption UNLESS the fact pattern actually gives you the quoted language of the grant creating the concurrent estate and asks you about the type of tenancy involved.

Front 88

Concurrent Estates: Joint Tenancy: Severance

Back 88

Under certain circumstances, the right of survivorship is severed (i.e., terminated) and a tenancy in common results.

Front 89

Concurrent Estates: Joint Tenancy: Severance: Inter Vivos Conveyance

Back 89

A voluntary or involuntary conveyance by a joint tenant of her undivided interest destroys the joint tenancy. The transferee takes as a tenant in common. When there are more than two joint tenants, conveyance by one destroys the joint tenancy only to the extent of the conveyor’s interest.

Front 90

Concurrent Estates: Joint Tenancy: Severance: Inter Vivos Conveyance: Transactions that May Not Result in Severance: Judgment Liens

Back 90

Usually when a plaintiff obtains a money judgment against a defendant, that judgment becomes a lien on the defendant’s real property in the county where the judgment is docketed. The lien runs with the land, burdening it until the judgment is paid or the lien expires (usually 10 years). If such a lien is acquired against a joint tenant, it does not sever the joint tenancy until it is actually sold at a foreclosure sale.

Front 91

Concurrent Estates: Joint Tenancy: Severance: Inter Vivos Conveyance: Transactions that May Not Result in Severance: Mortgages

Back 91

In most states, a mortgage is a lien on title and does not sever a joint tenant. Severance occurs only if the mortgage is foreclosed and the property is sold. The execution of a mortgage in title theory states, however, does sever a joint tenancy.

Front 92

Concurrent Estates: Joint Tenancy: Severance: Inter Vivos Conveyance: Transactions that May Not Result in Severance: Leases

Back 92

States are split as to whether one joint tenant’ lease of her interest causes a severance.

Front 93

Concurrent Estates: Joint Tenancy: Severance: Contract to Convey

Back 93

Severance results if one joint tenant contracts to convey her interest, but the courts are split on whether an executory contract by ALL joint tenants works a severance.

Front 94

Concurrent Estates: Joint Tenancy: Severance: Testamentary Disposition Has No Effect

Back 94

A will is ineffective to work a severance because at death the testator’s interest vanishes.

Front 95

Concurrent Estates: Joint Tenancy: Severance: Effect of One Joint Tenant’s Murdering Another

Back 95

Conceptually, a joint tenant who murders the other joint tenant should not lose her right of survivorship. In some jurisdictions, statutes change this result; in others, a constructive trust is imposed for the decedent’s estate.

Front 96

Concurrent Estates: Tenancy by the Entirety

Back 96

A tenancy by the entirety is a MARITAL estate akin to joint tenancy. IN some common law jurisdictions, it arises presumptively in any conveyance to a husband and wife. Only death, divorce, MUTUAL agreement, or execution by a joint creditor of BOTH the husband and wife can sever a tenancy by the entirety. An individual spouse cannot convey or encumber tenancy by the entirety property. A deed or mortgage executed by only one spouse is ineffective.

Front 97

Concurrent Estates: Tenancy in Common

Back 97

A tenancy in common is a concurrent estate with no right of survivorship. Tenants can hold different interests in the property, but each is entitled to possession of the whole. Interests are alienable, devisable, and inheritable. Today, multiple grantees are PRESUMED to take as tenants in common, not as joint tenants.

Front 98

Concurrent Estates: Rights and Duties of Co-Tenants: Possession

Back 98

Each co-tenant has the right to possess all portions of the property but has no right to exclusive possession of any part. A co-tenant out of possession cannot bring a possessory action unless she is “OUSTED” (e.g., another co-tenant claims right to exclusive possession).

Front 99

Concurrent Estates: Rights and Duties of Co-Tenants: Rents and Profits

Back 99

In most states, a co-tenant in possession has the right to retain profits from her own use of the property; i.e., she need not share profits with other co-tenants absent ouster or an agreement to the contrary. She must, however, share net rents from third parties and net profits gained from exploitations of land, such as mining.

Front 100

Concurrent Estates: Rights and Duties of Co-Tenants: Effect of One Concurrent Owner’s Encumbering the Property

Back 100

A joint tenant or tenant in common may encumber her interest (e.g., by mortgage or judgment lien), but may not encumber the interests of other co-tenants. If, e.g., one tenant in common mortgages her interest, the mortgagee can foreclose only on the mortgaging co-tenant’s interest. If a joint tenancy is involved, a mortgage (in a lien theory state) or lien does not sever the joint tenancy, but a foreclosure sale will. Note, however, that in the case of a joint tenancy, a mortgagee or lienor runs the risk that the obligated co-tenant will die before foreclosure, extinguishing the mortgagee’s or lienor’s interest.

Front 101

Concurrent Estates: Rights and Duties of Co-Tenants: Remedy of Partition

Back 101

Any co-tenant has a right to judicial partition, either IN KIND (physical division of land among co-tenants) or BY SALE AND DIVISION OF THE PROCEEDS. Courts prefer partition in kind but will permit partition by sale when a fair and equitable physical division of the property cannot be made. Although generally this right may be exercised at any time, restraints on partition by co-tenants are valid, provided they are limited to a REASONABLE TIME.

Front 102

Concurrent Estates: Rights and Duties of Co-Tenants: Expenses for Preservation of Property—Contribution: Repairs

Back 102

A co-tenant who pays more than her pro rata share of NECESSARY repairs is entitled to contribution from the other co-tenants, provided she has notified the other co-tenants of the need for repairs.

Front 103

Concurrent Estates: Rights and Duties of Co-Tenants: Expenses for Preservation of Property—Contribution: Improvements

Back 103

There is no right of contribution for the cost of improvements unless there is a partition.

Front 104

Concurrent Estates: Rights and Duties of Co-Tenants: Expenses for Preservation of Property—Contribution: Taxes and Mortgages

Back 104

Contribution can be demanded for taxes or mortgage payments paid on the entire property. However, reimbursement to a co-tenant in sole possession is limited to the extent that expenditures exceed the rental value of her use.

Front 105

Concurrent Estates: Rights and Duties of Co-Tenants: Duty of Fair Dealing

Back 105

A confidential relationship exists among co-tenants; e.g., one co-tenant’s acquisition of an outstanding title or lien that may affect the estate is deemed to be on behalf of other co-tenants. It is difficult for one co-tenant to adversely possess against other co-tenants.

Front 106

Landlord and Tenant: Nature of Leasehold

Back 106

A leasehold is an ESTATE IN LAND, under which the tenant has a present possessory interest in the leased premises and the landlord has a future interest (reversion)

Front 107

Landlord and Tenant: Nature of Leasehold: Tenancies for Years

Back 107

A tenancy for years continues for a FIXED period of time (e.g., L rents to T for two years).

Front 108

Landlord and Tenant: Nature of Leasehold: Tenancies for Years: Creation

Back 108

Tenancies for years are usually created by written leases. Under the Statute of Frauds, a writing is required if the lease is for more than one year.

Front 109

Landlord and Tenant: Nature of Leasehold: Tenancies for Years: Termination

Back 109

A tenancy for years ends AUTOMATICALLY at its termination date.

Front 110

Landlord and Tenant: Nature of Leasehold: Tenancies for Years: Termination: Breach of Covenants

Back 110

In most leases, the landlord reserves a RIGHT OF ENTRY, which allows him to terminate the lease if the tenant breaches any of the lease’s covenants.

Front 111

Landlord and Tenant: Nature of Leasehold: Tenancies for Years: Termination: Breach of Covenants: Failure to Pay Rent

Back 111

In many jurisdictions a landlord may, by statute, terminate the lease upon the tenant’s failure to pay the promised rent—even in the absence of a reserved right of entry.

Front 112

Landlord and Tenant: Nature of Leasehold: Tenancies for Years: Termination: Surrender

Back 112

A tenancy for years may also terminate if the tenant surrenders the tenancy and the landlord accepts. The same formalities required for creation of the leasehold are required for surrender (e.g., if unexpired term exceeds one year, surrender must be in writing).

Front 113

Landlord and Tenant: Nature of Leasehold: Periodic Tenancies

Back 113

A periodic tenancy continues for successive periods (e.g., month to month) until terminated by proper notice of either party.

Front 114

Landlord and Tenant: Nature of Leasehold: Periodic Tenancies: Creation

Back 114

A periodic tenancy can be created by:
1. EXPRESS AGREEMENT (e.g., L leases to T from month to month);
2. IMPLICATION (e.g., L leases to T at a rent of 1,000 payable monthly); or
3. OPERATION OF LAW (e.g., T remains in possession after the lease expires, and L treats it as a periodic tenancy; or the lease is invalid, but T goes into possession).

Front 115

Landlord and Tenant: Nature of Leasehold: Periodic Tenancies: Termination

Back 115

A periodic tenancy is AUTOMATICALLY RENEWED until proper notice of termination is given. Usually, the notice must be one full period in advance (e.g., one month’s notice for a month-to-month tenancy) and timed to terminate the lease at the end of a period (e.g., the usual month-to-month tenancy can end only on the 30th or 31st, not the 15th). For a year-to-year lease, six months’ notice is required.

Front 116

Landlord and Tenant: Nature of Leasehold: Tenancies at Will

Back 116

A tenancy at will is terminable at the will of either the landlord or the tenant.

Front 117

Landlord and Tenant: Nature of Leasehold: Tenancies at Will: Creation

Back 117

Generally, a tenancy at will must be created by an express agreement that the lease can be terminated at any time. Absent such an agreement, periodic rent payments will cause a court to treat it as a periodic tenancy. If the lease gives only the landlord the right to terminate, a similar right will be implied in favor of the tenant. However, if only the tenant has a right to terminate, a similar right will not be implied in favor of the landlord.

Front 118

Landlord and Tenant: Nature of Leasehold: Tenancies at Will: Termination

Back 118

A tenancy at will may be terminated by giving notice and a reasonable time to quit by any party with the power to do so, or it may be terminated by OPERATION OF LAW (e.g., death, commission of waste, etc.)

Front 119

Landlord and Tenant: Nature of Leasehold: Tenancies at Sufferance: Creation

Back 119

A tenancy at sufferance arises when a tenant WRONGFULLY remains in possession after the expiration of a lawful tenancy.

Front 120

Landlord and Tenant: Nature of Leasehold: Tenancies at Sufferance: Termination

Back 120

A tenancy at sufferance lasts only until the landlord takes steps to evict the tenant. No notice of termination is required.

Front 121

Landlord and Tenant: Nature of Leasehold: The Hold-Over Doctrine

Back 121

If a tenant continues in possession after his right to possession has ended, the landlord may:
1. EVICT him, or
2. Bind him to a NEW PERIODIC TENANCY.

Generally, the terms and conditions of the expired tenancy govern the new one.

COMMERCIAL tenants may be held to a new year-to-year tenancy if the original lease term was for ONE YEAR OR MORE, or a periodic term based on the frequency of rent payments (e.g., month to month) if the original term was for LESS THAN ONE YEAR.

RESIDENTIAL tenants, however, are generally held to a new month-to-month tenancy, regardless of the original term. If the landlord notifies the tenant BEFORE the lease expires that occupancy after the termination will be at an increased rent, the tenant, by holding over, is held to have acquiesced to the new terms (even if the tenant actually objected to the new terms).

Front 122

Exam Tip

Back 122

There are exceptions to the hold-over doctrine. Watch for situations where:
1. The tenant remains in possession for ONLY A FEW HOURS after termination or leaves a few articles of personal property,
2. The delay is NOT THE TENANT’S FAULT (e.g., severe illness), or
3. It is a SEASONAL LEASE.

In these cases, the landlord cannot bind the tenant to a new tenancy.

Front 123

Landlord and Tenant: Leases

Back 123

A lease is a contract that governs the landlord-tenant relationship. Covenants in the lease are generally INDEPENDENT; i.e., if one party breaches a covenant, the other party can recover damages but must still perform his promises and cannot terminate the landlord-tenant relationship. The doctrines of actual and constructive eviction and the implied warranty of habitability are exceptions to this rule. Also, many states have created a statutory exception allowing the landlord to terminate the lease for the nonpayment of rent.

Front 124

Landlord and Tenant: Tenant Duties and Landlord Remedies: Tenant’s Duty to Repair (Doctrine of Waste)

Back 124

A tenant cannot damage (i.e., commit waste on) the leased premises. The rules governing waste in the leasehold context are much like those governing waste in the life estate context.

Front 125

Landlord and Tenant: Tenant Duties and Landlord Remedies: Tenant’s Duty to Repair (Doctrine of Waste): Types of Waste

Back 125

There are three types of waste:
1. Voluntary (affirmative) waste
2. Permissive Waste
3. Ameliorative Waste

Front 126

Landlord and Tenant: Tenant Duties and Landlord Remedies: Tenant’s Duty to Repair (Doctrine of Waste): Types of Waste: Voluntary (affirmative) Waste

Back 126

Voluntary waste results when the tenant intentionally or negligently damages the premises or exploits minerals on the property

Front 127

Landlord and Tenant: Tenant Duties and Landlord Remedies: Tenant’s Duty to Repair (Doctrine of Waste): Types of Waste: Permissive Waste

Back 127

Permissive waste occurs when the tenant fails to take reasonable steps to protect the premises from damage from the elements. The tenant is liable for all ORDINARY repairs, excluding ordinary wear and tear. If the duty is shifted to the landlord (by lease or statute), the tenant has a duty to report deficiencies promptly.

Front 128

Landlord and Tenant: Tenant Duties and Landlord Remedies: Tenant’s Duty to Repair (Doctrine of Waste): Types of Waste: Ameliorative Waste

Back 128

Ameliorative waste occurs when the tenant alters the leased property, thereby increasing its value. Generally, the tenant is liable for the cost of restoration. There is a modern exception to this rule, however, which permits a tenant to make this type of change if he is a long-term tenant and the change reflects changes in the neighborhood.

Front 129

Landlord and Tenant: Tenant Duties and Landlord Remedies: Tenant’s Duty to Repair (Doctrine of Waste): Destruction of Premises Without Fault

Back 129

If the leased premises are destroyed without the fault of either the landlord or the tenant, no waste is involved. In the absence of lease language or a statute to the contrary, neither party has a duty to restore the premises, but the tenant has a duty to continue paying rent. In most states, statutes or case law now give the tenant the option to terminate the lease in this situation, even in the presence of an explicit covenant to repair.

Front 130

Landlord and Tenant: Tenant Duties and Landlord Remedies: Tenant’s Duty to Repair (Doctrine of Waste): Tenant’s Liability for Covenants to Repair

Back 130

If a RESIDENTIAL tenant covenants to repair, the landlord usually remains obligated to repair (except for damages caused by the tenant) under the nonwaivable “implied warranty of habitability”. However, a NONRESIDENTIAL tenant’s covenant to repair is enforceable, and a landlord may be awarded damages for breach based on the property’s condition when the lease terminates compared with its condition when the lease commenced. A tenant who covenants to repair is NOT usually liable to rebuild after structural damage or casualty destruction, unless the covenant EXPRESSLY INCLUDES these types of repairs. In the absence of a specific reference to ordinary wear and tear, a covenant to repair usually INCLUDES such repair. However, repair covenants frequently EXCLUDE ordinary wear and tear.

Front 131

Landlord and Tenant: Tenant Duties and Landlord Remedies: Duty to Not Use Premises for Illegal Purpose

Back 131

If the tenant uses the premises for an illegal purpose, the landlord may terminate the lease or obtain damages and injunctive relief. Occasional unlawful conduct by the tenant does not breach this duty.

Front 132

Landlord and Tenant: Tenant Duties and Landlord Remedies: Duty to Pay Rent

Back 132

At common law, rent was due at the end of the leasehold term. However, leases usually contain a provision making rent payable at some other time (e.g., “monthly in advance”). Most states today have statutes providing that if the leasehold terminates before the time originally agreed upon, the tenant must pay a PROPORTIONATE AMOUNT of the agreed rent.

Front 133

Landlord and Tenant: Tenant Duties and Landlord Remedies: Duty to Pay Rent: Rent Deposits

Back 133

The landlord is not permitted to retain a SECURITY DEPOSIT beyond the damages actually suffered. If a rent deposit is denominated a “BONUS,” the landlord can retain it after the tenant is evicted.

Front 134

Landlord and Tenant: Tenant Duties and Landlord Remedies: Duty to Pay Rent: Termination of Rent Liability—Surrender

Back 134

If a tenant effectively conveys (surrenders) his leasehold interest back to the landlord, his duty to pay rent ends.

Front 135

Landlord and Tenant: Tenant Duties and Landlord Remedies: Landlord Remedies: Tenant on Premises But Fails to Pay Rent—Evict or Sue for Rent

Back 135

At common law, a breach of the lease, such as failure to pay rent, resulted only in a cause of action for money damages; a breach did not give rise to a right to terminate the lease. Most modern leases, however, give the nonbreaching party the right to terminate. Thus, if a tenant is on the premises and fails to pay rent, the landlord may bring suit for rent due or may evict the tenant under the state’s UNLAWFUL DETAINER statute. The ONLY issue in an unlawful detainer proceeding is whether the tenant has the right to possession; the tenant cannot raise counterclaims.

Front 136

Landlord and Tenant: Tenant Duties and Landlord Remedies: Landlord Remedies: Tenant Abandons—Do Nothing or Repossess

Back 136

If the tenant UNJUSTIFIABLY abandons the property, the majority view is that the landlord has a duty to mitigate damages by seeking to relet the premises. If the landlord repossesses and/or relets, the tenant’s liability depends on whether the landlord has ACCEPTED THE SURRENDER. If surrender is not found, the tenant is liable for the difference between the promised rent and the fair rental value of the property (in cases of reletting, between the promised rent and the rent received from the reletting). If surrender is found, the tenant is free from any rent liability accruing from abandonment. Note that the landlord’s resumption of possession for himself constitutes acceptance of surrender.

Front 137

Landlord and Tenant: Landlord Duties and Tenant Remedies

Back 137

Subject to modification by the lease, a statute, or the implied warranty of habitability, the general rule is that a landlord has NO DUTY TO REPAIR OR MAINTAIN the premises.

Front 138

Landlord and Tenant: Landlord Duties and Tenant Remedies: Duty to Deliver Possession of Premises

Back 138

Statutes in most states require the landlord to put the tenant in ACTUAL possession of the premises at the beginning of the leasehold term; i.e., the landlord is in breach if he has not evicted a hold-over tenant by the beginning of the lease term.

Front 139

Landlord and Tenant: Landlord Duties and Tenant Remedies: Quiet Enjoyment

Back 139

Every lease has an implied covenant that neither the landlord nor a paramount title holder (e.g., a prior mortgagee who forecloses) will interfere with the tenant’s quiet enjoyment and possession of the premises. This covenant may be breached in the following ways:
1. Actual Eviction
2. Partial Eviction
3. Constructive Eviction

Front 140

Landlord and Tenant: Landlord Duties and Tenant Remedies: Quiet Enjoyment: Actual Eviction

Back 140

Actual eviction occurs when the landlord, a paramount title holder, or a hold-over tenant excludes the tenant from the ENTIRE leased premises. Actual eviction terminates the tenant’s obligation to pay rent.

Front 141

Landlord and Tenant: Landlord Duties and Tenant Remedies: Quiet Enjoyment: Partial Eviction

Back 141

Partial actual eviction occurs when the tenant is physically excluded from only part of the leased premises. Partial eviction BY THE LANDLORD relieves the tenant of the obligation to pay rent for the ENTIRE premises, even though the tenant continues in possession of the remainder. Partial eviction BY A THIRD PERSON with paramount title results in an APPORTIONMENT of rent; i.e., the tenant is liable for the reasonable rental value of the portion she continues to possess.

Front 142

Landlord and Tenant: Landlord Duties and Tenant Remedies: Quiet Enjoyment: Constructive Eviction

Back 142

If the landlord does something (or, more often, fails to provide a service he has a legal duty to provide) that renders the property UNINHABITABLE, the tenant may terminate the lease and seek damages. The conditions must be the result of the LANDLORD’S ACTIONS (not a neighbor’s or a third party’s), and the tenant MUST VACATE the premises within a reasonable time.

Front 143

Landlord and Tenant: Landlord Duties and Tenant Remedies: Implied Warranty of Habitability

Back 143

Most jurisdictions imply a covenant of habitability into RESIDENTIAL LEASES. This warranty is NONWAIVABLE. The landlord’s duty is tied to standards of local housing codes. In the event of a breach, the tenant may:
1. TERMINATE the lease;
2. MAKE REPAIRS AND OFFSET the cost against future rent;
3. ABATE THE RENT to amount equal to the fair rental value in view of the defects; or
4. Remain in possession, pay full rent, and SUE FOR DAMAGES.

Front 144

Exam Tip

Back 144

Keep in mind that the implied warranty of habitability does NOT apply to commercial tenants—only to residential tenants.

Front 145

Landlord and Tenant: Landlord Duties and Tenant Remedies: Retaliatory Eviction

Back 145

In many states, a landlord may not terminate a lease or otherwise penalize a tenant in retaliation for the tenant’s exercise of her legal rights, including reporting housing or building code violations. Many statutes presume a retaliatory motive if the landlord acts within, e.g., 90 to 180 days after the tenant exercises her rights. To overcome the presumption, the landlord must show a valid, nonretaliatory reason for his actions.

Front 146

Landlord and Tenant: Landlord Duties and Tenant Remedies: Discrimination

Back 146

Tenants and potential tenants are protected by the CIVIL RIGHTS ACT of 1866, which bars racial and ethnic discrimination, and the FAIR HOUSING ACT, which bars discrimination based on ethnicity, religion, national origin, gender, and disability, as well as discrimination against families with children (except in senior housing).

Front 147

Landlord and Tenant: Assignments and Subleases

Back 147

Absent an express restriction in the lease, a tenant may freely transfer her leasehold interest, in whole or in part. A COMPLETE transfer of the entire remaining term is an ASSIGNMENT . If the tenant retains any part of the remaining term (other than a right to reenter upon breach), the transfer is a SUBLEASE.

Front 148

Exam Tip

Back 148

For bar exam purposes, a transfer will be considered a sublease, rather than an assignment, only when the original tenant reserves time for herself (e.g., the last month of the lease).

Front 149

Landlord and Tenant: Assignments and Subleases: Consequences of Assignment

Back 149

An assignee stands in the shoes of the original tenant in a direct relationship with the landlord; i.e., the assignee and the landlord are in “PRIVITY OF ESTATE,” and each is liable to the other on all covenants in the lease that “run with the land.”

Front 150

Landlord and Tenant: Assignments and Subleases: Consequences of Assignment: Covenants that Run with the Land

Back 150

A covenant runs with the land if the original parties to the lease so intend and if the covenant “TOUCHES AND CONCERNS” the land (i.e., benefits the landlord and burdens the tenant (or vice versa) with respect to their interests in the property.

Front 151

Landlord and Tenant: Assignments and Subleases: Consequences of Assignment: Rent Covenants

Back 151

Because a covenant to pay rent runs with the land, the assignee owes rent DIRECTLY to the landlord. After assignment, the original tenant is no longer in privity of estate with the landlord but remains liable on the ORIGINAL CONTRACTUAL OBLIGATION to pay rent (PRIVITY OF CONTRACT). If the assignee reassigns the leasehold interest, his privity of estate with the landlord ends, and he has no liability for the subsequent assignee’s failure to pay rent.

Front 152

Landlord and Tenant: Assignments and Subleases: Consequences of Sublease—Sublessee Not in Privity with Landlord

Back 152

A sublessee is the tenant of the original lessee and usually pays rents to the original lessee, who then pays the landlord. A subleessee is not personally liable to the landlord for rent or for the performance of any covenants in the main lease unless the sublessee EXPRESSLY ASSUMES the covenants.

Front 153

Landlord and Tenant: Assignments and Subleases: Consequences of Sublease—Sublessee Not in Privity with Landlord: Landlord’s Remedies

Back 153

The landlord may terminate the main lease for nonpayment of rent or breach of other covenants if the lease so states or the power is given by statute. The sublease automatically terminates with the main lease. Also, many states allow a landlord who does not receive rent to assert a lien on personal property found on the premises; this applies to a sublessee’s property as well as that of the original tenant.

Front 154

Landlord and Tenant: Assignments and Subleases: Consequences of Sublease—Sublessee Not in Privity with Landlord: Rights of Sublessee

Back 154

A sublessee cannot enforce any covenants made by the landlord in the main lease, except a residential sublessee may be able to enforce the implied warranty of habitability against the landlord.

Front 155

Landlord and Tenant: Assignments and Subleases: Covenants Against Assignment or Sublease

Back 155

Lease covenants restricting assignment and sublease are strictly CONSTRUED AGAINST THE LANDLORD. (Thus, a covenant prohibiting assignment does not prohibit subleasing and vice versa.)

Front 156

Landlord and Tenant: Assignments and Subleases: Covenants Against Assignment or Sublease: Waiver

Back 156

A valid covenant against assignment is considered waived if the landlord was aware of the assignment and did not object (e.g., by knowingly accept rent from the assignee). Once the landlord consents to one transfer, the Rule in Dumpor’s Case provides that he waives the covenant as to future transfers unless he expressly reserves it.

Front 157

Landlord and Tenant: Assignments and Subleases: Covenants Against Assignment or Sublease: Transfer in Violation of Lease

Back 157

If a tenant assigns or sublets in violation of a lease provision, the transfer is not void. The landlord, however, usually may terminate the lease or sue for damages.

Front 158

Landlord and Tenant: Assignments and Subleases: Assignments by Landlords

Back 158

A landlord may assign the rents and reversion interest he owns. This is usually done by deed when the landlord conveys a building to a new owner. The tenants’ consent is NOT required.

Front 159

Landlord and Tenant: Assignments and Subleases: Assignments by Landlords: Rights of Assignee Against Tenants—Attornment

Back 159

Once tenants are given reasonable notice of the assignment, they must recognize and pay rent to the new owner as their landlord. The benefit of all tenants covenants that touch and concern the land runs with the landlord’s estate to the new owner.

Front 160

Landlord and Tenant: Assignments and Subleases: Assignments by Landlords: Liabilities of Assignee to Tenants

Back 160

The burden of the landlord’s covenants that touch and concern the land runs with the landlord’s estate to the assignee; thus, the assignee is liable for the performance of those covenants. THE ORIGINAL LANDLORD ALSO REMAINS LIABLE ON ALL OF THE COVENANTS HE MADE IN THE LEASE.

Front 161

Landlord and Tenant: Condemnation of Leaseholds

Back 161

If the ENTIRE LEASEHOLD is taken by eminent domain, the tenant’s liability for rent is extinguished because both the leasehold and reversion have merged in the condemnor and there is no longer a leasehold estate. The lessee is entitled to compensation. However, if the taking is TEMPORARY or PARTIAL, the tenant is NOT discharged from the rent obligation, but is entitled to compensation (i.e., a share of the condemnation award) for the taking.

Front 162

Landlord and Tenant: Tort Liability of Landlord and Tenant: Landlord’s Liability

Back 162

At common law, a landlord had NO DUTY to make the premises safe. Today, there are six exceptions:
1. Concealed Dangerous Condition (Latent Defect)
2. Common Areas
3. Public Use
4. Furnished Short-Term Residence
5. Negligent Repairs by Landlord
6. Landlord Contracts to Repair

Front 163

Landlord and Tenant: Tort Liability of Landlord and Tenant: Landlord’s Liability: Concealed Dangerous Condition (Latent Defect)

Back 163

If, at the time the lease is entered into, the landlord knows (or should know) of a dangerous condition that the tenant could not discover by reasonable inspection, the landlord must DISCLOSE (not repair) it. Otherwise, the landlord will be liable for any injuries resulting from the condition. If the tenant accepts the premises after disclosure, she assumes the risk for herself and others; the landlord is no longer liable.

Front 164

Landlord and Tenant: Tort Liability of Landlord and Tenant: Landlord’s Liability: Common Areas

Back 164

The landlord has a duty of reasonable care in maintaining common areas (e.g., halls, elevators).

Front 165

Landlord and Tenant: Tort Liability of Landlord and Tenant: Landlord’s Liability: Public Use

Back 165

A landlord is liable for injuries to members of the public if, at the time of the lease, he:
1. Knows (or should know) of a DANGEROUS CONDITION;
2. Has reason to believe the tenant MAY ADMIT THE PUBLIC BEFORE REPAIRING the condition; and
3. FAILS TO REPAIR the condition.

Front 166

Landlord and Tenant: Tort Liability of Landlord and Tenant: Landlord’s Liability: Furnished Short-Term Residence

Back 166

A landlord who rents a fully furnished premises for a short period (e.g., summer cottage) is under a stricter duty. He is liable for injuries resulting from ANY defect whether or not he knew of the defect.

Front 167

Landlord and Tenant: Tort Liability of Landlord and Tenant: Landlord’s Liability: Negligent Repairs by Landlord

Back 167

Even if a landlord has no duty to make repairs, a landlord who actually attempts to repair is liable if an injury results because the repairs are done NEGLIGENTLY or give a DECEPTIVE APPEARANCE OF SAFETY.

Front 168

Landlord and Tenant: Tort Liability of Landlord and Tenant: Landlord’s Liability: Landlord Contracts to Repair

Back 168

If the landlord covenants to repair, he is liable for injuries resulting from his failure to repair or negligent repair.

Front 169

Landlord and Tenant: Tort Liability of Landlord and Tenant: Modern Trend—General Duty of Reasonable Care

Back 169

Many courts are now holding that a landlord owes a general duty of reasonable care toward residential tenants, and will be liable for injuries resulting from ORDINARY NEGLIGENCE if he had NOTICE of a defect and an opportunity to repair it.

Front 170

Landlord and Tenant: Tort Liability of Landlord and Tenant: Modern Trend—General Duty of Reasonable Care: Defects Arising After Tenant Takes Possession

Back 170

A landlord generally is held to have notice of defects existing before the tenant took possession but is NOT LIABLE for defects arising after the tenant takes possession UNLESS the landlord knew or should have known of them.

Front 171

Landlord and Tenant: Tort Liability of Landlord and Tenant: Modern Trend—General Duty of Reasonable Care: Legal Duty to Repair

Back 171

If the landlord has a statutory duty to repair (e.g., housing codes), he is liable for injuries resulting from his failure to repair or negligent repair.

Front 172

Landlord and Tenant: Tort Liability of Landlord and Tenant: Modern Trend—General Duty of Reasonable Care: Security

Back 172

Some courts hold landlords liable for injuries to tenants inflicted by third-party criminals where the landlord failed to comply with housing code provisions dealing with security, maintain ordinary security measures, or provide advertised extraordinary security measures (e.g., surveillance cameras).

Front 173

Landlord and Tenant: Tort Liability of Landlord and Tenant: Tenant’s Liability

Back 173

The duty of care owed by a tenant, as an occupier of land, to third persons is discussed in the Torts outline.

Front 174

Fixtures: In General

Back 174

A fixture is a chattel that has been so affixed to land that it has ceased being personal property and have become part of the realty. A fixture passes with the ownership of the land.

Front 175

Fixtures: Chattels Incorporated Into Structure

Back 175

When items are incorporated into the realty so that they lose their identity (e.g., bricks, concrete), they are fixtures, as are items that are identifiable but whose removal would cause considerable damage (e.g., plumbing, heating ducts).

Front 176

Fixtures: Common Ownership Cases

Back 176

A common ownership case is one in which the person who brings the chattel to the land owns both the chattel and the land (e.g., X installs a furnace in his home). An item is a “fixture” if the OBJECTIVE INTENTION of the party who made the “annexation” was to make the item part of the realty. This intention is determined by: the NATURE OF THE ARTICLE, the MANNER OF ATTACHMENT, the AMOUNT OF DAMAGE that would be caused by its removal, and the ADAPTATION of the item to the use of the realty.

Front 177

Fixtures: Common Ownership Cases: Constructive Annexation

Back 177

An article of personal property that is so uniquely adapted to the real estate that it makes no sense to separate it (e.g., keys to doors, custom curtain rods) may be considered a fixture even if it is not physically annexed to the property.

Front 178

Fixtures: Divided Ownership Cases

Back 178

In divided ownership cases, the chattel is owned and brought to the realty by someone other than the landowner (e.g., tenant, licensee, or trespasser). ACCESSION describes the annexor’s intent to make chattels a permanent part of the real estate.

Front 179

Fixtures: Divided Ownership Cases: Landlord-Tenant

Back 179

An AGREEMENT between the landlord and tenant is controlling on whether an annexed chattel is a fixture. Absent an agreement, a tenant is deemed to lack the intent to permanently improve the property, and thus may remove his annexed chattels if removal does not substantialy damage the premises or destroy the chattel. Annexed chattels must be removed BY THE END OF THE LEASE TERM (or within a reasonable time after the termination of an indefinite tenancy), and the tenant is responsible for REPAIRING any damage caused by the removal.

Front 180

Fixtures: Divided Ownership Cases: Life Tenant and Remainderman

Back 180

The same rules apply in the life tenant-remainderman context as in landlord-tenant situations, except that the life tenant’s representative may remove annexations within a reasonable time after the life tenant’s death.

Front 181

Fixtures: Divided Ownership Cases: Licensee or Trespasser and Landowner

Back 181

Licensees are treated much like tenants, whereas trespassers normally lose their annexations. Thus, absent a statute, an adverse possessor or good faith trespasser cannot remove fixtures (e.g., house erroneously constructed on a parcel that possessor believed she owned). Some courts, however, allow a good faith trespasser recovery measured by the value added to the land (not construction costs).

Front 182

Fixtures: Third-Party Cases: Third-Party Lien on Chattel Affixed to Land

Back 182

Suppose a landowner affixes a chattel to the land. The seller of the chattel retains a security interest in the chattel, and the landowner mortgages the land. If the landowner then defaults on both chattel and mortgage payments, as between the seller and the mortgagee, the general rule is that the first to record his interest wins. However, under the UCC, a seller wins if the “fixture filing” is recorded within 20 days after the chattel is affixed to the land. The seller must compensate the mortgagee for damage or repair caused by removal.

Front 183

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: In General

Back 183

Easements, profits, covenants, and servitudes are NONPOSSESSORY interests in land, creating a right to USE LAND POSSESSED BY SOMEONE ELSE.

Front 184

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Introduction

Back 184

An easement holder has the right to use another’s tract of land for a special purpose (e.g., to lay pipe, to access a road or lake), but has no right to possess or enjoy that land. An easement is presumed to be of PERPEUTAL DURATION unless the grant specifically limits the interest.

Front 185

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Introduction: Types of Easements

Back 185

Most easements are AFFIRMATIVE, which means the holder is entitled to make affirmative use of the servient tenement. NEGATIVE easements entitle the holder to compel the possessor of the servient tenement to refrain from engaging in an activity on the servient estate (e.g., building a structure in excess of three stories). Historically, negative easements were recognized only for LIGHT, AIR, lateral or subjacent SUPPORT, and FLOW of an artificial stream. Today, negative easements are simply restrictive covenants.

Front 186

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Introduction: Easement Appurtenant

Back 186

An easement is appurtenant when it benefits the holder in his physical use or enjoyment of another tract of land. Thus, for an easement to be appurtenant, there must be TWO TRACTS: the DOMINANT tenement (the estate benefited by the easement), and the SERVIENT tenement (the estate subject to the easement right). An easement appurtenant passes with the transfer of the benefited land, regardless of whether it is mentioned in the conveyance. The burden of the easement also passes automatically with the servient estate unless the new owner is a bona fide purchaser with no actual or constructive notice of the easement.

Front 187

Exam Tip

Back 187

It is important to remember that the easement appurtenant PASSES WITH THE BENEFITED LAND. Don’t be fooled by questions that make you think it must be specifically mentioned in the deed. Similarly, recall that an easement appurtenant cannot be conveyed apart from the dominant tenement (unless it is conveyed to the owner of the servient tenement to EXTINGUISH the easement).

Front 188

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Introduction: Easement in Gross

Back 188

The holder of an easement in gross acquires a right to use the servient tenement independent of his possession of another tract of land; i.e., the easement benefits the holder rather than another parcel. An easement in gross for the holder’s personal pleasure e.g., right to swim in the pond on blackacre) is not transferable, but one that serves an economic or commercial interest (e.g., right to erect billboards on Blackacre) is transferable.

Front 189

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements

Back 189

The basic methods of creating an easement are: express grant or reservation, implication, and prescription.

Front 190

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements: Express Grant

Back 190

Any easement must be in writing and signed by the holder of the servient tenement unless its duration is brief enough (commonly one year or less) to be outside the coverage of a particular state’s Statute of Frauds. A grant of easement must comply with all the formal requisites of a deed.

Front 191

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements: Express Reservation

Back 191

An easement by reservation arises when a grantor conveys title to land but reserves the right to continue to use the tract for a special purpose.

Front 192

Exam Tip

Back 192

Watch for fact patterns in which a grantor reserves an easement for someone else. Under the majority view, an easement can be reserved only for the GRANTOR. An attempt to reserve an easement for anyone else is VOID.

Front 193

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements: Implication

Back 193

An easement by implication is created by operation of law; it is an exception to the Statute of Frauds. There are three types of easements by implication:
1. Easement Implied from Existing Use (“Quasi-Easement”)
2. Easement Implied Without Any Existing Use
3. Easement by Necessity.

Front 194

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements: Implication: Easement Implied from Existing Use (“Quasi-Easement”)

Back 194

An easement may be implied if:
1. PRIOR TO THE DIVISION of a single tract;
2. An APPARENT AND CONTINUOUS use exists on the “servient” part;
3. That is REASONABLY NECESSARY for the enjoyment of the “dominant” part; and
4. The court determines that the parties INTENDED the use to continue after division of the land.

Front 195

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements: Implication: Easement Implied Without Any Existing Use

Back 195

In two limited situations, easements may be implied without preexisting use:
1. Subdivision Plat
2. Profit a Prendre

Front 196

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements: Implication: Easement Implied Without Any Existing Use: Subdivision Plat

Back 196

When lots are sold in a subdivision with reference to a recorded plat or map that also shows streets leading to the lots, buyers of the lots have implied easements to use the streets to access their lots.

Front 197

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements: Implication: Easement Implied Without Any Existing Use: Profit a Prendre

Back 197

The holder of the profit a prendre has an implied easement to pass over the surface of the land and to use it as reasonably necessary to extract the product.

Front 198

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements: Implication: Easement by Necessity

Back 198

An easement by necessity arises when a landowner sells a portion of his tract and by this division deprives on lot of access to a public road or utility line. The owner of the servient parcel has the right to locate the easement.

Front 199

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Creation of Easements: Prescription

Back 199

Acquiring an easement by prescription is analogous to acquiring property by adverse possession. To acquire a prescriptive easement, the use must be:
1. OPEN AND NOTORIOUS (i.e., discoverable upon inspection);
2. ADVERSE (i.e., without the owner’ permission); and
3. CONTINUOUS AND UNINTERRUPTED;
4. For the STATUTORY PERIOD.

Generally, prescriptive easements cannot be acquired in public land.

Front 200

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Scope

Back 200

In the absence of specific limitations in the grant, courts assume that the easement was intended to meet both present and future needs of the dominant tenement (e.g., easement may widen to accommodate new, wider cars). If, however, the dominant parcel is subdivided, the lot owners will not succeed to the easement if to do so would unreasonably overburden the servient estate.

Front 201

Exam Tip

Back 201

When confronted with an exam question involving overuse or misuse of an easement, remember that such use DOES NOT TERMINATE the easement. The appropriate remedy for the servient owner is an injunction against the misuse.

Front 202

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Scope: Use of Servient Estate—Repairs

Back 202

The servient owner generally may use her land in any way she wishes so long as her conduct does not interfere with performance of the easement. The easement holder has the duty to make repairs to the easement if he is the sole user; but if both parties are using the easement, the court will apportion the repair costs.

Front 203

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Termination of Easements

Back 203

An easement can be terminated in the following ways:
1. Stated conditions
2. Unity of ownership (Merger)
3. Release
4. Abandonment
5. Estoppel
6. Prescription
7. Necessity
8. Condemnation and Destruction

Front 204

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Termination of Easements: Stated Conditions

Back 204

The original easement grant may specify when or under what conditions the easement will terminate.

Front 205

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Termination of Easements: Unity of Ownership (Merger)

Back 205

If the same person acquires ownership of both the easement and the servient estate, the dominant and servient estates merge and the easement is destroyed. Even though there may be later separation, the easement will not be automatically revived. The unity must be complete (e.g., the holder of the easement must acquire an interest in the servient tenement of EQUAL OR GREATER DURATION than the duration of the easement privilege).

Front 206

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Termination of Easements: Release

Back 206

An easement (including an easement in gross, which is otherwise inalienable) can be terminated by a deed of release from the owner of the easement to the owner of the servient tenement.

Front 207

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Termination of Easements: Abandonment

Back 207

An easement is extinguished when its holder demonstrates by physical action (e.g., building a structure that blocks access to easement on adjoining lot) an intent to permanently abandon the easement. Merely expressing a wish to abandon does not extinguish the easement; neither does mere nonuse. However, oral expressions combined with a long period of nonuse may be sufficient.

Front 208

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Termination of Easements: Estoppel

Back 208

Oral expressions of an intent to abandon do not terminate an easement unless committed to writing (release) or accompanied by action (abandonment). But if the owner of the servient estate changes his position in reasonable reliance on the representations made or conduct by the owner of the easement, the easement terminates through estoppel.

Front 209

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Termination of Easements: Prescription

Back 209

To terminate an easement by prescription, there must be an adverse, continuous interruption of the use for the prescriptive period (typically 20 years).

Front 210

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Termination of Easements: Necessity

Back 210

Easements created by necessity expire as soon as the necessity ends

Front 211

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Termination of Easements: Condemnation and Destruction

Back 211

Condemnation of the servient estate extinguishes all easements. Courts are split as to whether easement holders are entitled to compensation. Involuntary destruction of a structure in which there is an easement extinguishes the easement; voluntary destruction of such a structure does not.

Front 212

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Compare—Licenses

Back 212

Licenses privilege their holders to go upon the land or another. But unlike an easement, a license is not an interest in land; it is merely a privilege, REVOCABLE at the will of the licensor. A license is personal to the licensee and, thus, inalienable. Any attempt to transfer a license results in revocation by operation of law.

Front 213

Exam Tip

Back 213

A failed attempt to create an easement results in a license. Thus, if a grantor orally grants an easement for more than one year, it is unenforceable because it is not in writing. The grantee does not have a valid easement but does have a license.

Front 214

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Irrevocable Licenses

Back 214

A license becomes irrevocable in the following circumstances:
1. Estoppel
2. License Coupled with an Interest

Front 215

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Irrevocable Licenses: Estoppel

Back 215

If a licensee invests substantial amounts of money or labor in reliance on the license, the licensor is estopped to revoke. The license becomes an easement by estoppel, which lasts until the holder receives sufficient benefit to reimburse him for his expenditures.

Front 216

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Easements: Irrevocable Licenses: License Coupled with an Interest

Back 216

A license coupled with an interest is irrevocable as long as the interest lasts. For example, the vendee of a chattel may enter the seller’s land to remove the chattel, and a future interest holder may enter and inspect the land for waste.

Front 217

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Profits

Back 217

Profits entitle the holder of the benefit to take some resources (e.g., soil, timber, materials, fish) from the servient estate. Implied in every profit is an easement entitling the benefit holder to enter the servient estate to remove the resources. All of the rules governing creation, alienation, and termination of easements are applicable to profits. In addition, a profit may be extinguished through SURCHARGE (misuse that overly burdens the servient estate).

Front 218

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Covenants Running With the Land at Law (Real Covenants)

Back 218

A real covenant, normally found in a deed, is a WRITTEN PROMISE to do something on the land (e.g., maintain a fence) or a promise not to do something on the land (e.g., not build a multifamily dwelling). Real covenants run with the land at law, which means that subsequent owners may enforce or be burdened by the covenants.

Front 219

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Covenants Running With the Land at Law (Real Covenants): Requirements for Burden to Run

Back 219

If the following requirements are met, any successor in interest to the burdened estate will be bound b

If the following requirements are met, any successor in interest to the burdened estate will be bound by the covenant as if she had herself expressly agreed to it:
1. Intent
2. Notice
3. Horizontal Privity
4. Vertical Privity
5. Touch and Concern

Front 220

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Covenants Running With the Land at Law (Real Covenants): Requirements for Burden to Run: Intent

Back 220

The covenanting parties must have INTENDED that successor in interest to the covenantor be bound by the terms of the covenant. This intent may be inferred from circumstances surrounding the creation of the covenant, but is usually found in the language of the conveyance itself.

Front 221

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Covenants Running With the Land at Law (Real Covenants): Requirements for Burden to Run: Notice

Back 221

Under modern recording acts, to be bound by a covenant, a subsequent purchaser for value must have had actual, inquiry, or record notice of the arrangement at the time or purchase.

Front 222

Exam Tip

Back 222

Because the notice requirement arises under the recording acts, remember that it will protect ONLY PURCHASERS FOR VALUE. Someone who does not give value may be bound by a covenant at law (not equity) even if he has no actual or constructive notice of the covenant.

Front 223

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Covenants Running With the Land at Law (Real Covenants): Requirements for Burden to Run: Horizontal Privity

Back 223

At the time the promisor entered into the covenant with the promise, the two must have shared SOME INTEREST in the land independent of the covenant (e.g., grantor-grantee, landlord-tenant, mortgagee-mortgagor)

Front 224

Exam Tip

Back 224

Horizontal privity concerns only the ORIGINAL parties. Even if successors in interest are trying to enforce the covenant, you must look only to the original covenanting parties to determine horizontal privity.

Front 225

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Covenants Running With the Land at Law (Real Covenants): Requirements for Burden to Run: Vertical Privity

Back 225

To be bound, the successor in interest to the covenanting party must hold the ENTIRE DURATIONAL INTEREST held by the covenantor at the time he made the covenant.

Front 226

Rights in the Land of Another—Easements, Profits, Covenants, and Servitudes: Covenants Running With the Land at Law (Real Covenants): Requirements for Burden to Run: Touch and Concern

Back 226

Negative covenants touch and concern the land if they restrict the holder of the servient estate in hi USE OF THAT PARCEL of land. Affirmative covenants touch and concern the land if they require the holder of the servient estate to DO SOMETHING, which increases his obligations in connection with his enjoyment of the land.

Front 227

Covenants Running With the Land at Law (Real Covenants): Requirements for Benefit to Run

Back 227

If the following three requirements are met, the promisee’s successor in interest may enforce the covenant:
1. Intent
2. Vertical Privity
3. Touch and Concern

Front 228

Covenants Running With the Land at Law (Real Covenants): Requirements for Benefit to Run: Intent

Back 228

The covenanting parties must have INTENDED that the successors in interest to the covenantee be able to enforce the covenant.

Front 229

Covenants Running With the Land at Law (Real Covenants): Requirements for Benefit to Run: Vertical Privity

Back 229

The benefits of a covenant run to the assignees of the ORIGINAL ESTATE OR ANY LESSER ESTATE; i.e., ANY succeeding possessory estate may enforce the benefit.

Front 230

Exam Tip

Back 230

Horizontal privity is not required for the benefit to run. Thus, where horizontal privity is lacking, the promisee’s successors can enforce the covenant against the promisor, but not against the promisor’s successors.

Front 231

Covenants Running With the Land at Law (Real Covenants): Requirements for Benefit to Run: Touch and Concern

Back 231

The benefit of a covenant touches and concerns the land if the promised performance benefits the covenantee and her successors in their use and enjoyment of the benefited land.

Front 232

Covenants Running With the Land at Law (Real Covenants): Specific Situations Involving Real Covenants

Back 232

Generally, promises to PAY MONEY to be used in connection with the land (e.g., homeowners’ association fees) and covenants NOT TO COMPETE run with the land. Racially restrictive covenants are unenforceable.

Front 233

Covenants Running With the Land at Law (Real Covenants): Remedy—Damages Only

Back 233

A breach of a real covenant is remedied by an award of money damages, collectible from the defendant’s general assets. If an injunction is sought, the promise must be enforced as an equitable servitude rather than a real covenant.

Front 234

Covenants Running With the Land at Law (Real Covenants): Termination

Back 234

As will all other nonpossessory interests, a covenant may be terminated by:
1. A written RELEASE,
2. The MERGER of the benefited and burdened estates, or
3. The CONDEMNATION of the burdened property.

Front 235

Equitable Servitudes

Back 235

An equitable servitude is a covenant that, regardless of whether it runs with the land at law, equity will enforce against the assignees of the burdened land who have NOTICE of the covenant. The usual remedy is an injunction.

Front 236

Exam Tip

Back 236

The crucial difference between real covenants and equitable servitudes is the REMEDY SOUGHT. If money damages are sought, you must use the real covenant analysis. If a party seeks an injunction, you must consider whether the requirements for enforcement as an equitable servitude have been met. A single promise can create both a real covenant and an equitable servitude.

Front 237

Equitable Servitudes: Creation

Back 237

Generally, as with real covenants, equitable servitudes are created by COVENANTS contained in a WRITING that satisfies the Statute of Frauds. There is ONE EXCEPTION: Negative equitable servitudes may be implied from a common scheme for development of a residential subdivision. Thus, if a developer subdivides land, and some deeds contain negative covenants while others do not, the negative covenants will be binding on all parcels provided there was a common scheme of development and notice of the covenants.

Front 238

Equitable Servitudes: Creation: Common Scheme

Back 238

Reciprocal negative servitudes will be implied only if, at the time that sales in the subdivision began, the developer had a plan that all parcels would be subject to the restriction. The scheme may be evidenced by:
1. A RECORDED PLAT,
2. A GENREAL PATTERN of restrictions, or
3. ORAL REPRESENTATION to early buyers.

Front 239

Exam Tip

Back 239

If the scheme arises after some lots are sold, no implied servitude can arise with respect to the lots already sold without express covenants. So remember, if Lots 1 through 5 are sold without a restrictive covenant and the deeds to Lots 6 through 50 contain one, the covenant cannot be enforced as a servitude against the owners of Lots 1 through 5.

Front 240

Equitable Servitudes: Creation: Notice

Back 240

To be bound by a covenant not in her deed, a grantee must have had notice of the covenants in the deeds of others in the subdivision. Notice may be ACTUAL (direct knowledge of covenants), INQUIRY (neighborhood appears to conform to common restrictions), or RECORD (prior deed with covenant in grantee’s chain of title).

Front 241

Equitable Servitudes: Requirements for Burden to Run

Back 241

A successor of the promisor is bound if:
1. The covenanting parties INTENDED that the servitude be enforceable by and against assignees;
2. The successor of the promisor has ACTUAL, INQUIRY, OR RECORD notice of the servitude; and
3. The covenant TOUCHES AND CONCERNS the land (i.e., it restricts the holder of the servient estate in his use of that parcel).

Front 242

Equitable Servitudes: Requirements for Benefit to Run

Back 242

The benefit of an equitable servitude runs with the land, and thus is enforceable by the promisee’s successors, if:
1. The original parties so INTENDED, and
2. The servitude TOUCHES AND CONCERNS the benefited property.

Front 243

Exam Tip

Back 243

In contrast to real covenants, which require vertical and horizontal privity of estate for burdens to run, and vertical privity for benefits to run, NO PRIVITY OF ESTATE IS REQUIERD for an equitable servitude to be enforceable by and against assignees.

Front 244

Equitable Servitudes: Equitable Defenses to Enforcement

Back 244

A court will not enforce an equitable servitude if:
1. The person seeking enforcement is violating a similar restriction on his own land (UNCLEAN HANDS);
2. A benefited party ACQUIESCED in a violation of the servitude by one burdened party;
3. A benefited party acted in such a way that a reasonable person would believe the covenant was abandoned (ESTOPPEL);
4. The benefited party fails to bring suit against the violator within a reasonable time (LACHES); or
The NEIGHBORHOOD HAS CHANGED so significantly that enforcement would be inequitable.

Front 245

Equitable Servitudes: Termination

Back 245

Like other nonpossessory interests, an equitable servitude may be extinguished by:
1. WRITTEN RELEASE from the benefit holders,
2. MERGER of the benefited and burdened estates, or
3. CONDEMNATION of the burdened property.

Front 246

Party Walls and Common Driveways

Back 246

Courts will treat a wall erected partly on the property of each of two adjoining landowners as belonging to each owner to the extent it rests upon her land. Courts will also imply mutual CROSS-EASEMENTS OF SUPPORT, with the result that each party can use the wall or driveway and neither party can unilaterally destroy it.

Front 247

Party Walls and Common Driveways: Creation

Back 247

A WRITTEN AGREEMENT is required by the Statute of Frauds for the express creation of a party wall or common driveway agreement, but an “irrevocable license” can arise from detrimental reliance on a parol agreement. Party walls and common driveways can also result from IMPLICATION or PRESCRIPTION.

Front 248

Party Walls and Common Driveways: Running of Covenants

Back 248

If party wall or common driveway owners agree to be mutually responsible for maintaining the wall or driveway, the burdens and benefits of these covenants run to the successive owners of each parcel.

Front 249

Adverse Possession: In General

Back 249

Title to real property may be acquired by adverse possession. Title by adverse possession results from the operation of the statute of limitations for trespass. If an owner does not, within the statutory period, take action to eject a possessor who claims adversely to the owner, the title vests in the possessor.

Front 250

Adverse Possession: Requirements

Back 250

To establish title by adverse possession, the possessor must show:
1. An ACTUAL ENTRY giving EXCLUSIVE POSSESSION that it
2. OPEN AND NOTORIOUS,
3. ADVERSE (hostile), and
4. CONTINUOUS throughout the statutory period.

Front 251

Adverse Possession: Requirements: Running of Statute

Back 251

The statute of limitations begins to run when the true owner can first bring suit. Filing a suit will not stop the period from running, however; the suit must be pursued to judgment.

Front 252

Adverse Possession: Requirements: Actual and Exclusive Possession

Back 252

An adverse possessor will gain title only to land she actually occupies. In some cases, actual possession of the entire parcel claimed is not necessary. If an adverse possessor actually occupies a reasonable portion of the parcel, and her occupation is under COLOR OF TITLE (i.e., a document that purports to give title but does not actually do so) to the entire parcel, then she will be deemed to have constructively possessed the ENTIRE parcel, with the same result as if she had actually occupied the entire parcel. “Exclusive” means that the possessor is not sharing with the true owner or the public. Two or more people may obtain title by adverse possession; they take title as tenants in common.

Front 253

Adverse Possession: Requirements: Open and Notorious Possession

Back 253

Possession is open and notorious when it is the kind of use the owner would make of the land. The adverse possessor’s occupation must be SUFFICIENTLY APPARENT to put the true owner on NOTICE that a trespass is occurring.

Front 254

Adverse Possession: Requirements: Hostile

Back 254

The hostility requirement is satisfied if the possessor enters WITHOUT THE OWNER’S PERMISSION. The adverse possessor’s state of mind is irrelevant; i.e., it does not matter whether she believes the land to be her own or knows she is trespassing. When possession starts permissively (e.g., by lease), possession does not become adverse until the possessor makes clear to the true owner the fact that she is claiming “hostilely.”

Front 255

Adverse Possession: Requirements: Hostile: Co-Tenants—Ouster Required

Back 255

Possession by one co-tenant is usually not adverse to his co-tenants because each co-tenant has the right to possession of all the property. A co-tenant must oust others or make an explicit declaration that he is claiming exclusive dominion to create adverse possession.

Front 256

Adverse Possession: Requirements: Hostile: Grantor Stays in Possession—Permission Presumed

Back 256

Where a grantor stays in possession of land after her conveyance, she is presumed to be there with permission of the grantee. (Likewise, if a tenant remains in possession after the expiration of the lease, he is presumed to have permission of the landlord.)

Front 257

Adverse Possession: Requirements: Continuous Possession

Back 257

An adverse claimant’s possession must be continuous throughout the statutory period. Intermittent periods of occupancy are NOT sufficient. However, constant use by the claimant is not required as long as possession is of a type that the usual owner would make. Also, there need NOT be continuous possession by the same person; an adverse possessor can TACK her own possession onto the periods of adverse possession of her predecessors, but PRIVITY is required.

Front 258

Adverse Possession: Requirements: Payment of Property Taxes Generally Not Required

Back 258

Most states do NOT require the adverse possessor to pay taxes on the property, but consider such payment good evidence of a claim of right.

Front 259

Adverse Possession: Disability

Back 259

The statute of limitations does not begin to run if the true owner was under some disability to sue WHEN THE CAUSE OF ACTION FIRST ACCRUED. (Typical disabilities: minority, imprisonment, insanity.) Only the disability of the OWNER existing at the time the cause of action arose is considered.

Front 260

Adverse Possession: Adverse Possession and Future Interests

Back 260

The statute of limitations does not run against a holder of a future interest until the interest becomes POSSESSORY.

Front 261

Exam Tip

Back 261

The event or condition giving rise to a grantor’s right of entry (e.g., “To Grantee on condition that if alcohol is ever used on the premises, Grantor shall have the right to reenter and retake the premises”) does not trigger the statute of limitations for purposes of adverse possession. The statute does not begin to run until the right is ASSERTED BY THE GRANTOR because, until that time, the grantee’s continued possession of the land is proper.

Front 262

Adverse Possession: Effect of Covenants in True Owner’s Deed

Back 262

If an adverse possessor uses the land in violation of a restrictive covenant in the owner’s deed for the limitations period, she takes free of the restriction. If, however, the possessor’s use complies with such a covenant, she takes title subject to the restriction.

Front 263

Adverse Possession: Land That Cannot Be Adversely Possessed

Back 263

Title to government-owned land and land registered under a Torrens system cannot be acquired by adverse possession.

Front 264

Conveyancing: Land Sale Contracts: Statute of Frauds Applicable

Back 264

A contract must be in writing and contain the signature of the party to be charged and the essential terms (e.g., parties, description of land, price). Part performance (e.g., possession, substantial improvements, payment of purchase price) can take a contract out of the statute.

Front 265

Conveyancing: Land Sale Contracts: Doctrine of Equitable Conversion

Back 265

Under this doctrine, once a contract is signed, equity regards the buyer as the owner of the REAL PROPERTY. The seller’s interest (the right to proceeds of sale) is considered PERSONAL PROPERTY. The bare legal title that remains in the seller is considered to be held in trust for the buyer. The right to possession follows the bare legal title, however; thus, the seller is entitled to possession until closing.

Front 266

Conveyancing: Land Sale Contracts: Doctrine of Equitable Conversion: Risk of Loss

Back 266

If property is destroyed (without fault of either party) before closing, the majority rule places the risk on the BUYER. Some states, however, have enacted the Uniform Vendor and Purchaser Risk Act, which places the risk on the seller unless the buyer has title or possession at the time of loss.

Front 267

Exam Tip

Back 267

Even though the risk of loss is on the buyer, if the property is damaged or destroyed, the seller must credit any fire or casualty insurance proceeds he receives against the purchase price the buyer is required to pay.

Front 268

Conveyancing: Land Sale Contracts: Doctrine of Equitable Conversion: Passage of Title on Death

Back 268

Under the doctrine of equitable conversion, if a party to a land sale contract dies before the contract is completed, the seller’s interest passes as personal property and the buyer’s interest passes as real property. Thus, if the seller dies, bare legal title passes to his heirs or devisees, but they must give up title to the buyer at closing. If the buyer dies, his heirs or devisees can demand a conveyance of the land at closing.

Front 269

Exam Tip

Back 269

If the property is specifically devised by will, check to see whether ademption or exoneration rules apply.

Front 270

Conveyancing: Land Sale Contracts: Marketable Title

Back 270

Every contract contains an implied covenant that the seller provide marketable title (i.e., title reasonably free from doubt) at closing. It need not be perfect title, but it must be free of questions that present an unreasonable risk of litigation.

Front 271

Conveyancing: Land Sale Contracts: Marketable Title: Defects in Record Chain of Title

Back 271

Title may be unmarketable because of a defect in the chain of title (e.g., variation in land description deeds, defectively executed deed, evidence that a prior grantor lacked capacity to convey).

Front 272

Conveyancing: Land Sale Contracts: Marketable Title: Defects in Record Chain of Title: Adverse Possession

Back 272

On the MBE, title acquired by adverse possession is UNMARKETABLE, despite the fact that most modern cases are contra.

Front 273

Conveyancing: Land Sale Contracts: Marketable Title: Defects in Record Chain of Title: Future Interests Held by Unborn or Unascertained Parties

Back 273

While most states consider all types of future interests transferable, when a holder of a future interest is unborn or unascertained it is impossible to convey marketable title. Courts will not appoint a guardian ad litem to represent the unborn or unascertained parties for the purpose of conveying land.

Front 274

Conveyancing: Land Sale Contracts: Marketable Title: Encumbrances

Back 274

Generally, mortgages, liens, restrictive covenants, easements, and SIGNIFICANT encroachments render tile unmarketable. An easement that is beneficial, visible, or known to the buyer does not impair the marketability of title.

Front 275

Exam Tip

Back 275

Remember that a seller has the right to satisfy a mortgage or lien AT CLOSING with the proceeds of the sale. Thus, the buyer cannot claim that title is unmarketable because it is subject to a mortgage prior to closing, if the closing will result in marketable title.

Front 276

Conveyancing: Land Sale Contracts: Marketable Title: Zoning Restrictions

Back 276

Zoning restrictions do not affect marketability, but an EXISTING VIOLATIONS of a zoning ordinance does render title unmarketable.

Front 277

Conveyancing: Land Sale Contracts: Marketable Title: Time of Marketability

Back 277

If the seller has agreed to furnish title at the date of closing, the buyer cannot rescind prior to that date on grounds that the seller’s title is not marketable. Note that in an installment land contract, the seller need not provide marketable title until the buyer has made his last payment.

Front 278

Exam Tip

Back 278

Avoid answer choices referring to the implied covenant of marketability of title if the closing has already occurred. Once the closing occurs and the deed changes hands, the seller is NO LONGER LIABLE on this implied contractual covenant. The seller is then liable only for express promises made IN THE DEED.

Front 279

Conveyancing: Land Sale Contracts: Marketable Title: Remedy If Title Not Marketable

Back 279

The buyer must notify the seller that his title is unmarketable and give him reasonable time to cure the defects. If the seller fails to cure the defect, the buyer’s remedies include rescission, damages, specific performance with abatement, and a quiet title suit. But if closing occurs, the contract and deed merge, and the seller’s liability on the implied contractual covenant ends.

Front 280

Exam Tip

Back 280

Don’t be fooled into choosing the answer that lets the seller off the hook for title defects because the contract calls for a quitclaim deed. A quitclaim deed does not in any way affect the implied covenant to provide marketable title.

Front 281

Conveyancing: Land Sale Contracts: Time of Performance

Back 281

Courts presume that time is not “of the essence” in real estate contracts. Thus, the closing date is not absolutely binding, and a party late in tendering her own performance can still enforce the contract if she tenders within a REASONABLE TIME (e.g., two months) after the closing date.

Front 282

Conveyancing: Land Sale Contracts: Time of Performance: When Presumption Overcome

Back 282

Time is of the essence if:
1. The CONTRACT so states,
2. The circumstances indicate that was the parties’ INTENT, or
3. One party gives the other NOTICE that time is of the essence.

Front 283

Conveyancing: Land Sale Contracts: Time of Performance: Liability

Back 283

If time is of the essence, a party who fails to tender performance on the closing date is in breach and may not enforce the contract. Even if time is not of the essence, a party who is late in tendering performance is liable for incidental losses.

Front 284

Conveyancing: Land Sale Contracts: Tender of Performance

Back 284

The buyer’s obligation to pay and the seller’s obligation to convey are CONCURRENT CONDITIONS. Thus, neither party is in breach until the other tenders performance (even if the closing date passes). If neither party tenders performance, the closing date is extended until one of them does so.

Front 285

Conveyancing: Land Sale Contracts: Tender of Performance: When Party’s Tender Excused

Back 285

A party need not tender performance if the other party has REPUDIATED the contract or it is IMPOSSIBLE (e.g., unmarketable title that cannot be cured) for the other party to perform.

Front 286

Conveyancing: Land Sale Contracts: Remedies for Breach of Sales Contract

Back 286

The nonbreaching party is entitled to DAMAGES (difference between the contract price and market value on date of breach, plus incidental costs) or, because land is unique, SPECIFIC PERFORMANCE. Note that if the buyer wishes to proceed despite unmarketable title, she can usually get specific performance with an abatement of the purchase price.

Front 287

Conveyancing: Land Sale Contracts: Remedies for Breach of Sales Contract: Liquidated Damages

Back 287

Sales contract usually require the buyer to deposit “earnest money” with the seller, and provide that if the buyer defaults in performance, the seller may retain this money as liquidated damages. Courts routinely uphold the seller’s retention of earnest money if the amount appears to be reasonable in light of the seller’s anticipated and actual damages.

Front 288

Conveyancing: Land Sale Contracts: Seller’s Liabilities for Defective Property: Warranty of Fitness or Quality—New Construction Only

Back 288

Contracts of sale and deeds of real property carry no implied warranty of quality or fitness for purpose. However, a majority of courts now recognize a warranty of fitness or quality in the sale of a new house by the builder.

Front 289

Conveyancing: Land Sale Contracts: Seller’s Liabilities for Defective Property: Negligence of Builder

Back 289

A person may sue a builder for negligence in performing a building contract. Some courts permit the ultimate vendee to sue the builder despite lack of privity.

Front 290

Conveyancing: Land Sale Contracts: Seller’s Liabilities for Defective Property: Sale of Existing Land and Buildings—Liability for Defects

Back 290

The seller of existing buildings (not new construction) may be liable to the purchaser for defects such as a leaky roof, flooding basement, or termite infestation, on any of several different theories:
1. Misrepresentation (Fraud)
2. Active Concealment
3. Failure to Disclose.

Front 291

Conveyancing: Land Sale Contracts: Seller’s Liabilities for Defective Property: Sale of Existing Land and Buildings—Liability for Defects: Misrepresentation (Fraud)

Back 291

The seller is liable for defects about which he KNOWINGLY OR NEGLIGENTLY made a false statement of fact to the buyer if the BUYER RELIED on the statement and it MATERIALLY AFFECTED the value of the property.

Front 292

Conveyancing: Land Sale Contracts: Seller’s Liabilities for Defective Property: Sale of Existing Land and Buildings—Liability for Defects: Active Concealment

Back 292

The seller will be liable for defects, even WITHOUT MAKING ANY STATEMENTS, if he took steps to CONCEAL THE DEFECTS (e.g., wallpapering over water damage).

Front 293

Conveyancing: Land Sale Contracts: Seller’s Liabilities for Defective Property: Sale of Existing Land and Buildings—Liability for Defects: Failure to Disclose

Back 293

Most states hold a seller liable for failure to disclose defects if:
1. He KNOWS OR HAS REASON TO KNOW of the defect;
2. The defect is NOT APPARENT, and the seller knows that the buyer is unlikely to discover it upon ordinary inspection; and
3. The defect is SERIOUS and would probably cause the buyer to reconsider the purchase if known.

Factors increasing the likelihood that liability will be imposed in these cases include whether the property is a personal residence, whether the defect is dangerous, and whether the seller created the defect or made a failed attempt to repair it.

Front 294

Conveyancing: Land Sale Contracts: Seller’s Liabilities for Defective Property: Disclaimers of Liability

Back 294

A general disclaimer in the sales contract (e.g., “property sold as is” or “with all defects”) is NOT sufficient to overcome a seller’s liability for fraud, concealment, or (in the states that recognize it) failure to disclose. If the disclaimer identifies SPECIFIC types of defects (e.g., “seller is not liable for any defects in the roof”), it will likely be upheld.

Front 295

Conveyancing: Land Sale Contracts: Real Estate Brokers

Back 295

Real estate brokers are the seller’s agent but should disclose material information about the property if thye have actual knowledge of it. Traditionally, agents earned their commission when they produced a buyer who was ready, willing, and able to purchase the property. Therefore, the commission was owed regardless of whether the deal actually closed. The growing trend, however, is to award the commission only if the sale actually closes or if it fails to close because of the fault of the seller.

Front 296

Conveyancing: Land Sale Contracts: Title Insurance

Back 296

A title insurance policy insures that a good record title of the property exists as of the policy’s date and promises to defend the record title if litigated. Title insurance PROTECTS ONLY THE PERSON WHO OWNS THE POLICY (usually either the owner of the property or the mortgage lender) and does not run with the land to subsequent purchasers.

Front 297

Conveyancing: Deeds—Form and Content

Back 297

Deeds transfer title to an interest in real property

Front 298

Conveyancing: Deeds—Form and Content: Formalities

Back 298

A deed must be IN WRITING, be SIGNED BY THE GRANTOR, and REASONABLY IDENTIFY THE PARTIES AND LAND. Most other formalities (e.g., seal, consideration, attestation, and acknowledgement) are generally unnecessary. Thus, a deed may validly convey real property by INTER VIVOS GIFT so long as the following requirements are met:
1. Donative intent,
2. Delivery, and
3. Acceptance.

Front 299

Exam Tip

Back 299

Note that if a deed is delivered with the NAME OF THE GRANTEE left blank, the court presumes that the person taking delivery has authority to fill in the name of the grantee. If the person fills in a name, the deed is valid. If, however, the LAND DESCRIPTION is left blank, the deed is void unless the grantee was explicitly given authority to fill in the description.

Front 300

Conveyancing: Deeds—Form and Content: Defective Deeds

Back 300

A VOID deed will be set aside by the court even if the property has passed to a bona fide purchaser, but a VOIDABLE deed will be set aside only if the property has NOT passed to a bona fide purchaser. Void deeds include those that are forged, were never delivered, or were obtained by fraud in the factum (i.e., the grantor was deceived and did not realize that she was executing a deed). Voidable deeds include those executed by minors or incapacitated persons, and those obtained through fraud in the inducement, duress, undue influence, mistake, and breach of fiduciary duty.

Front 301

Exam Tip

Back 301

Watch for a situation in which a joint owner attempts to convey property by forging the signature(s) of the other owner(s). Such a conveyance would be valid as to the interest of the owner whose signature is genuine but void as to the other owner(s). Thus, if one joint tenant executes a deed for the entire property with his own signature and the forged signature of the other joint tenant, the conveyance works a severance; the buyer would hold as a tenant in common with the joint tenant whose signature was forged.

Front 302

Conveyancing: Deeds—Form and Content: Fraudulent Conveyances

Back 302

Even when a deed complies with the required formalities, it may be set aside by the grantor’s creditors if it was made:
1. With actual intent to hinder, delay, or defraud any creditor of the grantor; or
2. Without receiving a reasonably equivalent value in exchange for the transfer, and the debtor was insolvent or became insolvent as a result of the transfer.

However, the deed will not be set aside as against any grantee who took in good faith and paid reasonably equivalent value.

Front 303

Conveyancing: Deeds—Form and Content: Description of Land Conveyed

Back 303

A description is sufficient if it provides a GOOD LEAD to the identity of the property (e.g., “all my land in Stockton”). If it is too indefinite, the grantor retains title (but reformation of the deed is a possible remedy). Parol evidence is generally admissible to resolve patent or latent ambiguities if the description gives a good lead, but it may not be admissible where the description is inadequate.

Front 304

Conveyancing: Deeds—Form and Content: Description of Land Conveyed: Rules of Construction

Back 304

Where descriptions are inconsistent or conflicting, these methods of description are given the following order of priority: natural monuments (e.g., oak tree); artificial monuments (e.g., stakes, buildings); courses (e.g., angles); distances (e.g., feet, yards); name (e.g., Blackacre); and quantity (e.g., 300 acres).

Front 305

Conveyancing: Deeds—Form and Content: Description of Land Conveyed: Boundary Cases

Back 305

Presumptively, title to land passes to the CENTER of a right-of-way or water boundary. This presumption can be rebutted by language in the deed. In variable boundary line cases (i.e., water boundary) the SLOW AND IMPERCEPTIBLE CHANGE in the course of a river or stream operates to change the legal boundary; ACCRETION (slow deposit of soil on land abutting water) belongs to the abutting owner. AVULSION (sudden change of watercourse) does not change ownership rights. Fixed boundaries are not changed by encroachment of water.

Front 306

Conveyancing: Deeds—Form and Content: Description of Land Conveyed: Reformation of Deeds

Back 306

A deed will be reformed if it does not represent the parties’ agreement because of:
1. MUTUAL MISTAKE,
2. A SCRIVENER’S ERROR, or
3. A unilateral mistake caused by MISREPRESENTATION or other inequitable conduct.

Front 307

Conveyancing: Delivery and Acceptance

Back 307

A deed is not effective unless it has been delivered and accepted.

Front 308

Exam Tip

Back 308

Remember that a deed to a dead person is void and conveys no title. The fat that the grantor was unaware of the grantee’s death is irrelevant. Title remains in the grantor.

Front 309

Conveyancing: Delivery and Acceptance: Delivery—In General

Back 309

Delivery refers to the grantor’s INTENTION to make a deed PRESENTLY effective even if possession is postponed. Delivery may be satisfied by manual delivery, notarized acknowledgement by the grantor and recordation, or anything else showing the grantor’s intent to deliver. Parol evidence is admissible on the issue of intent to deliver, but not to show that delivery was conditional.

Front 310

Exam Tip

Back 310

Title passes upon delivery. It cannot be canceled or taken back. Thus, if a fact pattern has the grantee returning a deed to the grantor, this has no effect; it is not a cancellation or a reconveyance. To return title to the grantor, the grantee must draw up a new deed and deliver it to the grantor.

Front 311

Conveyancing: Delivery and Acceptance: Retention of Interest by Grantor or Conditional Delivery

Back 311

Retention of control or interest by the grantor (e.g., right to revoke) indicates a lack of intent to pass title. Thus, if a grantor executes a deed but does not deliver it during his lifetime, no title passes. Failure to record a delivered deed does not affect the passage of title even if the parties believe that the deed is ineffective until recording.

Front 312

Conveyancing: Delivery and Acceptance: Retention of Interest by Grantor or Conditional Delivery: Express Condition of Grantor’s Death

Back 312

A properly executed and delivered deed that provides that title will not pass until the grantor’s death is valid and creates a future interest in the grantee.

Front 313

Conveyancing: Delivery and Acceptance: Retention of Interest by Grantor or Conditional Delivery: Conditions Not Contained in Deed

Back 313

If a deed is absolute on its face but delivered with an oral condition, the condition is disregarded and the delivery is absolute.

Front 314

Conveyancing: Delivery and Acceptance: Where Grantor Gives Deed to Third Party

Back 314

Here, conditional delivery is permissible.

Front 315

Conveyancing: Delivery and Acceptance: Where Grantor Gives Deed to Third Party: Transfer to Third Party with No Conditions

Back 315

If the grantor gives a deed to a third party with instructions to give it to the grantee, there is a valid delivery. If the grantor fails to give instructions, the validity of the delivery depends on whether the third party could be considered the grantor’s agent. If so, there is no delivery.

Front 316

Conveyancing: Delivery and Acceptance: Where Grantor Gives Deed to Third Party: Transfer to Third Party with Conditions (Commercial Transaction)

Back 316

A valid conditional delivery occurs when a grantor gives a deed to a third party with instructions to give it to the grantee when certain conditions occur (e.g., if grantee pays purchase price before a certain date). Parol evidence is admissible to show that delivery is conditional. (Remember that the rule is contra where the grantor gives the deed DIRECTLY to the grantee).

Front 317

Conveyancing: Delivery and Acceptance: Where Grantor Gives Deed to Third Party: Transfer to Third Party with Conditions (Commercial Transaction): Grantor’s Right to Recover Deed

Back 317

A grantor can revoke only if:
1. The condition has not yet occurred, and
2. There is no enforceable written contract to convey.

Front 318

Conveyancing: Delivery and Acceptance: Where Grantor Gives Deed to Third Party: Transfer to Third Party with Conditions (Commercial Transaction): Breach of Escrow Conditions

Back 318

If a grantee wrongfully acquires the deed from the escrow holder prior to performance of the condition, title does not pass and the grantee cannot give good title to a subsequent purchaser.

Front 319

Conveyancing: Delivery and Acceptance: Where Grantor Gives Deed to Third Party: Transfer to Third Party with Conditions (Commercial Transaction): “Relation Back” Doctrine

Back 319

Title usually passes when the condition occurs, but if justice requires it (e.g., grantor dies or becomes incompetent) and there is an enforceable contract to convey, title may “relate back” to the time when the grantor gave the deed to the third party. Rights of intervening bona fide purchasers are protected.

Front 320

Conveyancing: Delivery and Acceptance: Where Grantor Gives Deed to Third Party: Transfer to Third Party with Conditions (Donative Transaction)

Back 320

When a grantor gives a deed to a third party to give to a DONEE when a condition occurs, the main issue is whether the grantor can revoke the deed before the condition occurs. Where the condition is not the grantor’s death, most courts hold delivery revocable unless there is an enforceable contract to convey (i.e., same as true escrow cases). Where the condition is the grantor’s death, courts find delivery irrevocable where the grantor’s intent was to create a future interest in the donee.

Front 321

Conveyancing: Delivery and Acceptance: Acceptance

Back 321

Acceptance by the grantee is required in order to complete a conveyance. Most states PRESUME acceptance. Acceptance relates back to the date the deed was delivered into escrow (unless this would defeat the rights of intervening third parties).

Front 322

Conveyancing: Delivery and Acceptance: Dedication

Back 322

Land may be transferred to a public body (e.g., city, county) by dedication. An offer may be made by written or oral statement, submission of a map or plat showing the dedication, or opening the land for public use. To be effective, a dedication must be accepted, which may be done by formal resolution, approval of map or plat, or actual assumption of maintenance or improvements.

Front 323

Conveyancing: Covenants for Title and Estoppel by Deed

Back 323

There are three types of deeds used to convey property interests other than leaseholds: the GENERAL WARRANTY deed, the SPECIAL WARRANTY deed, and the QUITCLAIM deed. The difference among these deeds is the scope of title assurance (i.e., covenants for title).

Front 324

Exam Tip

Back 324

Be careful not to confuse covenants for title with real covenants (written promises to do or not do something on the land). They are completely different. Real covenants do not relate to title.

Front 325

Conveyancing: Covenants for Title and Estoppel by Deed: Covenants in General Warranty Deed: Usual Covenants

Back 325

The following are the usual covenants for title contained in a general warranty deed:
1. Covenant of Seisin
2. Covenant of Right to Convey
3. Covenant Against Encumbrances
4. Covenant for Quiet Enjoyment
5. Covenant of Warranty
6. Covenant for Further Assurances.

Front 326

Conveyancing: Covenants for Title and Estoppel by Deed: Covenants in General Warranty Deed: Covenant of Seisin

Back 326

The grantor covenants that she has the estate she purports to convey. She must have both title and possession at the time of the grant.

Front 327

Conveyancing: Covenants for Title and Estoppel by Deed: Covenants in General Warranty Deed: Covenant of Right to Convey

Back 327

The grantor covenants that she has the authority to make the grant. Title alone will satisfy this covenant.

Front 328

Conveyancing: Covenants for Title and Estoppel by Deed: Covenants in General Warranty Deed: Covenant Against Encumbrances

Back 328

The grantor covenants against the existence of physical (e.g., encroachments) or title (e.g., mortgages) encumbrances.

Front 329

Conveyancing: Covenants for Title and Estoppel by Deed: Covenants in General Warranty Deed: Covenant for Quiet Enjoyment

Back 329

The grantor covenants that the grantee will not be disturbed in possession by a third party’s LAWFUL claim of title.

Front 330

Conveyancing: Covenants for Title and Estoppel by Deed: Covenants in General Warranty Deed: Covenant of Warranty

Back 330

The grantor agrees to defend against reasonable claims of title by a third party and to compensate the grantee for any loss sustained by the claim of superior title.

Front 331

Exam Tip

Back 331

The covenant for quiet enjoyment and the covenant of warranty are generally considered to be similar covenants for title.

Front 332

Conveyancing: Covenants for Title and Estoppel by Deed: Covenants in General Warranty Deed: Covenant for Further Assurances

Back 332

The grantor promises to perform acts reasonably necessary to perfect title conveyed.

Front 333

Conveyancing: Covenants for Title and Estoppel by Deed: Covenants in General Warranty Deed: Breach of Covenants

Back 333

Three of the covenants (seisin, right to convey, against encumbrances) are breached, if at all, AT THE TIME OF CONVEYANCE. Quiet enjoyment, warranty, and further assurances are future covenants and are breached ONLY UPON DISTURBANCE OF THE GRANTEE’S POSSESSION. Present covenants cannot be enforced by remote grantees, but future covenants run with the grantee’s estate.

Front 334

Conveyancing: Covenants for Title and Estoppel by Deed: Covenants in General Warranty Deed: Damages and Remote Grantees

Back 334

If there are successive conveyances by general warranty deed and the last grantee is evicted by lawful claim of title, he may sue ANYONE up the line. Some states allow him to recover to the extent of consideration RECEIVED by a defendant-covenantor. Other states limit recovery to the LESSER of what he paid or what the defendant-covenantor received.

Front 335

Conveyancing: Covenants for Title and Estoppel by Deed: Statutory Special Warranty Deed

Back 335

In many states, use of the word “grant” in a deed creates by implication two limited assurances against acts of the grantor (not her predecessors):
1. That the grantor has not conveyed the same estate or any interest therein to anyone other than the grantee; and
2. That the estate is free from encumbrances made by the grantor.

Front 336

Conveyancing: Covenants for Title and Estoppel by Deed: Quitclaim Deeds

Back 336

A quitclaim deed releases WHATEVER INTEREST the grantor has. No covenants for title are included or implied.

Front 337

Conveyancing: Covenants for Title and Estoppel by Deed: Estoppel by Deed

Back 337

If the grantor purports to convey an estate in property that she does not then own, her subsequent acquisition of the estate will AUTOMATICALY inure to the benefit of the grantee. This doctrine applies where the conveyance was by warranty deed, or where the deed purported to convey a PARTICULAR estate. It is not usually applicable to quitclaim deeds.

Front 338

Conveyancing: Covenants for Title and Estoppel by Deed: Estoppel by Deed: Rights of Subsequent Purchasers

Back 338

Most courts hold that title inures to the benefit of the grantee only as against the grantor. Thus, if the grantor transfers her after-acquired title to a bona fide purchaser for value (“BFP”), the BFP will prevail over the original grantee.

Front 339

Conveyancing: Covenants for Title and Estoppel by Deed: Estoppel by Deed: Remedies of Grantee

Back 339

The original grantee can accept title or sue for damages for breach of covenant.

Front 340

Conveyancing: Recording

Back 340

At common law, if a grantor conveyed the same property twice, the grantee FIRST IN TIME generally prevailed. The recording acts change that outcome under certain circumstances.

Front 341

Conveyancing: Recording: Recording Acts—In General

Back 341

Recording acts generally protect all BFPs from SECRET interests previously created and provide a mechanism for “earlier” grantees to give notice through recordation. These statutes require a grantee to record his deed to put subsequent purchasers on notice of his interest. Recording is not essential to the validity of the deed between the grantor and the grantee, but it can be essential to protect the grantee against a BFP. Proper recordation gives CONSTRUCTIVE NOTICE of the first conveyance to everyone, so there can be no subsequent BFPs. Any instrument creating or affecting an interest in land can be recorded, provided it is acknowledged by the grantor before a notary public.

Front 342

Conveyancing: Recording: Types of Recording Acts

Back 342

Recording acts are in effect in every state. There are three major types, but under all three, the burden is on the subsequent taker to prove that he qualifies for protection under the statute.

Front 343

Conveyancing: Recording: Types of Recording Acts: Notice Statutes

Back 343

Under a notice statute, a subsequent BFP (person who pays value and has no notice of the prior instrument) prevails over a prior grantee who failed to record. The key is that the subsequent purchaser had NO ACTUAL OR CONSTRUCTIVE NOTICE AT THE TIME OF THE CONVEYANCE.

Example: O conveys to A on January 1. A does not record. O conveys to B on January 15 for valuable consideration. B has no notice of the conveyance to A. B prevails over A. It is irrelevant whether A recorded after January 15 and before B recorded, because B had no notice AT THE TIME HE TOOK. (This distinguishes notice and race-notice statutes.)

Front 344

Exam Tip

Back 344

Remember that under a notice statute, the subsequent BFP is protected regardless of whether she records at all.

Front 345

Conveyancing: Recording: Types of Recording Acts: Race-Notice Statutes

Back 345

Under a race-notice statute, a subsequent BFP is protected only if she takes without notice AND records before the prior grantee.

Example: O conveys to A on January 1. A does not record. O conveys to B on January 15 for valuable consideration. B has no notice of the conveyance to A. A records on January 18. B records on January 20. A prevails over B because B did not record first.

Front 346

Conveyancing: Recording: Types of Recording Acts: Race Statutes

Back 346

Under a pure race statute, whoever records first wins. Notice is irrelevant. Very few states have such statutes.

Front 347

Recording: Who is Protected by Recording Acts?

Back 347

Only BFPs are protected from the claims of a prior transferee under “notice” and “race-notice” statutes. To be a BFP, a person must be a purchaser, without notice (actual, constructive, or inquiry), and pay valuable consideration.

Front 348

Recording: Who is Protected by Recording Acts?: Purchasers

Back 348

All statutes protect purchasers (of the fee or lesser estate). Mortgagees for value are purchasers. Donees, heirs, and devisee are NOT protected because they do not give value.

Front 349

Recording: Who is Protected by Recording Acts?: Purchasers: Purchaser from Donee, Heir, or Devisee

Back 349

A purchaser from a donee, heir, or devisee of the record owner is protected against prior unrecorded conveyances of the record owner.

Front 350

Recording: Who is Protected by Recording Acts?: Purchasers: Judgment Creditors

Back 350

Most states permit a plaintiff who obtains a money judgment to place a judgment lien on the defendant’s real property by filing the judgment in the appropriate county office. The majority, however, hold that such a judgment creditor is NOT protected by the recording statute against a prior unrecorded conveyance by the defendant.

Front 351

Recording: Who is Protected by Recording Acts?: Purchasers: Transferees from Bona Fide Purchaser—Shelter Rule

Back 351

A person who takes FROM BFP will prevail against any interest the transferor-BFP would have prevailed against. This is true even if the transferee had actual notice of a prior unrecorded conveyance. This rule does not, however, help a transferee who previously held title; she cannot “ship through” a BFP to get good title.

Front 352

Recording: Who is Protected by Recording Acts?: Purchasers: Purchaser Under Installment Land Contract

Back 352

In most states, a purchaser under an installment land contract is protected only to the extent of payment made. In a dispute with a prior claimant, the court may award the purchaser:
1. A share of the property as a tenant in common equal to the proportion of PAYMENTS MADE;
2. A lien on the property to the extent of the AMOUNT PAID; or
3. The entire property, subject to a lien on the property to the extent of the BALANCE STILL OWED.

Front 353

Recording: Who is Protected by Recording Acts?: Without Notice

Back 353

“Without notice” means that the purchaser had no actual, constructive (record), or inquiry notice of a prior conveyance at the time she paid consideration and received the interest.

Front 354

Exam Tip

Back 354

In determining who is a BFP for purposes of protection of the recording statutes, remember that the purchaser must be without notice AT THE TIME OF CONVEYANCE. It does not matter if she learns of an adverse claim after the conveyance but before recording.

Front 355

Recording: Who is Protected by Recording Acts?: Without Notice: Actual Notice

Back 355

Actual notice includes knowledge obtained from any source (e.g., newspaper, word-of-mouth).

Front 356

Recording: Who is Protected by Recording Acts?: Without Notice: Record Notice—Chain of Title

Back 356

A subsequent purchaser will be held to have record notice only if the deed in question is recorded “in the chain of title,” which means that it is recorded in such a manner that a searcher could reasonably find it.

Front 357

Exam Tip

Back 357

Although NO ONE HAS A LEGAL DUTY to perform a title search, a subsequent purchaser will be charged with the notice that such a search WOULD provide, whether or not she actually searches.

Front 358

Recording: Who is Protected by Recording Acts?: Without Notice: Record Notice—Chain of Title: “Wild Deeds”

Back 358

A “wild deed” is a recorded deed that is not connected to the chain of title. It does not impart constructive notice because a subsequent purchaser could not feasibly find it.

Example: O conveys Blackacre to A. A does not record. A conveys it to B, and B records. O conveys Blackacre to C. C does not have notice of B’s claim.

Front 359

Recording: Who is Protected by Recording Acts?: Without Notice: Record Notice—Chain of Title: Deeds Recorded Late

Back 359

A deed recorded AFTER the grantor is shown by record to have parted with title through another (subsequent) instrument is not constructive notice in most states (but is in some “race-notice” jurisdictions).

Example: O conveys to A on March 1. O conveys to B on April 1. B records on April 10. A records on April 15. B conveys to C on May 1. If C has no actual or inquiry notice of the O-A deed, he will prevail. Most states would hold that A’s deed was recorded late and was not in C’s chain of title.

Front 360

Recording: Who is Protected by Recording Acts?: Without Notice: Record Notice—Chain of Title: Deeds Recorded Before Grantor Obtained Title

Back 360

There is a split of authority on whether a recorded deed, received from a grantor who has no title when conveyed but who afterwards obtains title, imparts constructive notice to subsequent purchasers. Most courts say it does not, and a BFP will win on the grounds that the deed is not in his chain of title. The minority view protects the prior grantee over the BFP on an estoppel by deed theory.

Front 361

Recording: Who is Protected by Recording Acts?: Without Notice: Record Notice—Chain of Title: Deed in Chain Referring to Instrument Outside Chain

Back 361

Reference to another instrument in a recorded document that is in the chain of title may impart constructive notice of the instrument referred to—even if it is unrecorded or not itself in the chain of title.

Front 362

Recording: Who is Protected by Recording Acts?: Without Notice: Record Notice—Chain of Title: Restrictive Covenants—Deeds from Common Grantor

Back 362

Courts are split on whether deeds to adjacent lots or lots in a subdivision, executed by the same grantor and containing restrictions and easements involving the subject lot, are within the chain of title of the subject lot. The better view is that they are not.

Front 363

Recording: Who is Protected by Recording Acts?: Without Notice: Inquiry Notice

Back 363

Under certain circumstances, a purchaser is required to make reasonable inquiries. He is charged with knowledge of whatever the inquiry WOULD HAVE REVEALED, even if in fact he made none. References in recorded instruments to unrecorded transactions, unrecorded instruments in the chain of title (e.g., grantor’s title documents are not recorded), and possession unexplained by the record put a purchaser on inquiry notice. The mere fact that a quitclaim deed was used does not charge the purchaser with inquiry notice.

Front 364

Recording: Who is Protected by Recording Acts?: Valuable Consideration

Back 364

To be protected by the recording statute, the subsequent grantee must prove that he is a purchaser, not a donee. The consideration need not be adequate, but it must be of some pecuniary value (i.e., love and affection is not valuable consideration). Note that property received as security for an antecedent debt is insufficient.

Front 365

Exam Tip

Back 365

A purchaser is protected by a recording statute only from the time consideration is paid. Thus, even if the deed was delivered and recorded before the consideration was paid, a purchaser will not prevail over deeds recorded subsequently but before the consideration was paid.

Front 366

Recording: Title Search

Back 366

In a TRACT INDEX jurisdiction, the searcher looks at the page indexed by block and/or lot describing the property and any instruments affecting it. In a GRANTOR AND GRANTEE INDEX jurisdiction, the searcher establishes a chain of title by searching back in time in the grantee-grantor index. From that point, he then searches forward in time in the grantor-grantee index to see if any grantor conveyed an interest to someone outside of the backward chain.

Front 367

Recording: Effect of Recordation

Back 367

Recordation gives prospective subsequent grantees constructive notice of the existence and content of recorded instruments. It also raises a PRESUMPTION of valid delivery an authenticity. However, it does not validate an invalid deed or protect against interests arising by operation of law (e.g., dower, title by adverse possession); to this extent, BFPs are still in jeopardy.

Front 368

Recording: Effect of Recordation: Recorder’s Mistakes

Back 368

An instrument is considered recorded when filed with the recorder’s office, regardless of whether it is thereafter properly indexed. A subsequent purchaser is charged with notice of a misindexed instrument but has a cause of action against the recorder’s office.

Front 369

Recording: Effect of Recordation: Effect of Recording Unacknowledged Instrument

Back 369

Because an unacknowledged instrument is not entitled to recordation, it does NOT give constructive notice. A subsequent grantee must have actual notice of a deed (e.g., discover it in a title search) to be bound by it.

Compare: Where acknowledgement is DEFECTIVE for reasons NOT APPARENT ON THE FACE of the instrument, the better view is that it imparts constructive notice.

Front 370

Conveyance by Will: Ademption

Back 370

If property is specifically devised or bequeathed in the testator’s will, but the testator no longer owns it at the time of death, the gift FAILS. Ademption applies only to specific bequests, which can be satisfied only by the delivery of a PARTICULAR ITEM; they cannot be satisfied by money. A gift of land is always a specific devise. If the testator specifically devises property and then sells or gives away a part of that property, only that portion is adeemed; the remainder passes to the devisee.

Front 371

Conveyance by Will: Ademption: Land Under Executory Contract

Back 371

The Uniform Probate Code and many state statutes do not apply the ademption doctrine to the proceeds of a contract for sale of land that was executory at the time of the testator’s death (i.e., the devisee gets the proceeds in place of the land). These statutes take precedence over the equitable conversion doctrine. In addition, ademption does not apply when the contract is entered into by the representative of an incompetent testator.

Front 372

Conveyance by Will: Ademption: Other Proceeds Not Subject to Ademption

Back 372

When property is damaged or destroyed before the testator’s death but the casualty insurance proceeds are not paid until after the testator’s death, ademption does not usually apply. The beneficiary of the specific bequest takes the insurance proceeds. Similarly, ademption usually does not apply to property condemned by the government where the taking was before death but the condemnation award was paid after death.

Front 373

Conveyance by Will: Exoneration

Back 373

At common law and in some states, the devisee of specific property is entitled to have the land “exonerated” by the payment of liens and mortgages from the testator’s residuary estate. However, a large number of states have statutorily abolished the exoneration doctrine, requiring the will to expressly provide for payoff.

Front 374

Conveyance by Will: Lapse and Anti-Lapse Statutes

Back 374

A lapse occurs when the beneficiary of a gift in a will DIES BEFORE THE TESTATOR. Under the common law, if a lapse occurred, the gift was void. However, nearly all states now have statutes that prevent lapse by permitting the gift to pass to the predeceasing beneficiary’s living descendants under certain circumstances. These statutes vary as to the scope of beneficiaries covered by the statute.

Front 375

Conveyance by Will: Lapse and Anti-Lapse Statutes: Degree of Relationship to Testator

Back 375

Many of the anti-lapse statutes apply only when the named beneficiary is a descendant of the testator. Others apply if the beneficiary is more remotely related, such as a descendant of the testator’s grandparent. Others apply to any relative, and still others apply to any beneficiary at all.

Front 376

Conveyance by Will: Lapse and Anti-Lapse Statutes: Degree of Relationship to Testator: Descendants Are Substitutes

Back 376

The anti-lapse statute does not save the gift for the predeceasing beneficiary’s estate; rather, it substitutes the beneficiary’s descendants for the beneficiary. Thus, property will never pass under the anti-lapse statute to a predeceasing beneficiary’s spouse.

Front 377

Conveyance by Will: Lapse and Anti-Lapse Statutes: Inapplicable if Beneficiary Dead When Will Executed

Back 377

If the beneficiary is already dead when the will is executed, the anti-lapse statute usually does not apply, and the gift will lapse and fail.

Front 378

Conveyance by Will: Lapse and Anti-Lapse Statutes: Application to Class Gifts

Back 378

If a class member within the coverage of an anti-lapse statute predeceases the testator leaving surviving issue, the statute will apply and the issue will take the deceased class member’s share of the gift.

Front 379

Conveyance by Will: Lapse and Anti-Lapse Statutes: Anti-Lapse Statute Does Not Apply if Contrary Will Provision

Back 379

The anti-lapse statute does not apply if there is a contrary will provision; e.g., the gift is contingent on the beneficiary’s surviving the testator.

Front 380

Conveyance by Will: Abatement

Back 380

If the estate assets are not sufficient to pay all claims against the estate and satisfy all devises and bequests, the gifts are abated (i.e., reduced). Absent a contrary will provision, estate in most states abate in the following order:
1. Property passing by intestacy,
2. The residuary estate,
3. General legacies, and
4. Specific devises and bequests.

Front 381

Crops (Emblements)

Back 381

Generally, the conveyance of land includes all crops growing on it. However, exceptions exist for:
1. Crops that have already been harvested or severed from the land, and
2. Crops planted by a tenant during the term of the tenancy.

For title to crops to remain in a tenant, the tenancy must have been of UNCERTAIN DURATION and have terminated WITHOUT FAULT on the part of the tenant.

Front 382

Security Interests in Real Estate: Types of Security Interests

Back 382

Of the five types of security interests in real estate, the first three are the most important:
1. Mortgage
2. Deed of Trust
3. Installment Land Contract
4. Absolute Deed
5. Sale-Leaseback

Front 383

Security Interests in Real Estate: Types of Security Interests: Mortgage

Back 383

The debtor/notemaker is the mortgagor. The lender is the mortgagee. On default, the lender can realize on the mortgaged real estate only by having a judicial foreclosure sale conducted by the sheriff.

Front 384

Security Interests in Real Estate: Types of Security Interests: Deed of Trust

Back 384

The debtor/notemaker is the trustor. He gives a deed of trust to a third-party trustee, who is usually closely connected to the lender (the beneficiary). On default, the lender instructs the tustee to foreclose the deed of trust by sale.

Front 385

Security Interests in Real Estate: Types of Security Interests: Installment Land Contract

Back 385

An installment purchaser obtains legal title only when the full contract price has been paid off. Forfeiture clauses, allowing the vendor upon default to cancel the contract, retake possession, and retain all money paid, are common.

Front 386

Security Interests in Real Estate: Types of Security Interests: Absolute Deed

Back 386

An absolute deed, if given for security purposes, can be treated by the court as an “EQUITABLE” MORTGAGE to be treated as any other mortgage (i.e., creditor must foreclose by judicial action).

Front 387

Security Interests in Real Estate: Types of Security Interests: Sale-Leaseback

Back 387

A landowner may sell her property for cash and then lease it back from the purchaser for a long period of time. Like an absolute deed, this may be treated as a disguised mortgage.

Front 388

Security Interests in Real Estate: Transfers by Mortgagee and Mortgagor

Back 388

All parties to a mortgage or deed of trust my transfer their interests. The note and mortgage must pass to the SAME PERSON for the transfer to be complete.

Front 389

Security Interests in Real Estate: Transfers by Mortgagee and Mortgagor: Transfer by Mortgagee: Transfer of Mortgagee Without Note

Back 389

Some states hold that the transfer of the mortgage automatically transfers the note as well, unless the mortgagee-transferor expressly reserves the rights to the note. In these states, the transferee of the mortgage can then file an equitable action and compel a transfer of the note as well. Other states hold that, because the note is the principal evidence of the debt, a transfer of the mortgage without the note is void.

Front 390

Security Interests in Real Estate: Transfers by Mortgagee and Mortgagor: Transfer by Mortgagee: Transfer of Note Without Mortgage

Back 390

The NOTE CAN BE TRANSFERRED WITHOUT THE MORTGAGE, but the mortgage will automatically follow the properly transferred note, unless the mortgagee-transferor expressly reserves the rights to the mortgage. No separate written assignment of the mortgage is necessary.

Front 391

Security Interests in Real Estate: Transfers by Mortgagee and Mortgagor: Transfer by Mortgagee: Transfer of Note Without Mortgage: Methods of Transferring the Note

Back 391

The note may be transferred either by indorsing it and delivering it to the transferee or by a separate document of assignment. Only if the indorsement and delivery method is used can the transferee become a HOLDER IN DUE COURSE. To be a holder in due course of the note, the following requirements must be met:
1. The note must be NEGOTIABLE IN FORM (payable “to bearer” or “to the order of” the named payee, with a promise to pay a sum certain, and no other promises).
2. The original note must be INDORSED and signed by the named payee.
3. The original note must be DELIVERED to the transferee.
4. The transferee must take the note IN GOOD FAITH (no notice that it is overdue, has been dishonored, is subject to any defense by the maker) and must pay VALUE for it.

Front 392

Security Interests in Real Estate: Transfers by Mortgagee and Mortgagor: Transfer by Mortgagee: Transfer of Note Without Mortgage: Benefits of Holder in Due Course Statues

Back 392

A holder in due course takes the note free of any personal defenses of the maker (e.g., failure of consideration, fraud in the inducement, waiver, estoppel, and payment) but is still subject to real defenses (e.g., infancy, other incapacity, duress, illegality, fraud in the execution, forgery, discharge in insolvency, and any other insolvency).

Front 393

Security Interests in Real Estate: Transfers by Mortgagee and Mortgagor: Transfer by Mortgagee: Transfer of Note Without Mortgage: Payment to Original Mortgagee after Transfer of Note

Back 393

If the original mortgagee transfers possession of a NEGOTIABLE instrument, any paymnent by the mortgagor to that mortgagee will not count. The holder can still demand payment—EVEN IF the mortgagor lacked notice of the transfer. However, if the original mortgagee transfers possession of a NONNEGOTIABLE note, the mortgagor’s payment to him is effective against the transferee UNTIL the mortgagor receives notice of the transfer.

Front 394

Security Interests in Real Estate: Transfers by Mortgagee and Mortgagor: Transfer by Mortgagor—Grantee Takes Subject to Mortgage

Back 394

A grantee of mortgaged property takes subject to the mortgage

Front 395

Security Interests in Real Estate: Transfers by Mortgagee and Mortgagor: Transfer by Mortgagor—Grantee Takes Subject to Mortgage: Assumption

Back 395

If the grantee signs an assumption agreement, he becomes PRIMARILY liable to the lender, while the ORIGINAL mortgagor is secondarily liable as a SURETY. If no assumption agreement is signed, the grantee is not personally liable on the loan, and the original mortgagor remains primarily and personally liable. However, if the grantee does not pay, the loan may be foreclosed, wiping out the grantee’s investment.

Front 396

Exam Tip

Back 396

Remember that once a grantee has assumed a mortgage, any modification of the obligation by the grantee and mortgagee discharges the original mortgagor of all liability.

Front 397

Security Interests in Real Estate: Transfers by Mortgagee and Mortgagor: Transfer by Mortgagor—Grantee Takes Subject to Mortgage: Due-on-Sale Clauses

Back 397

Due-on-Sale clauses, which appear in most modern mortgages, allow the lender to demand full payment of the loan if the mortgagor transfers any interest in the property without the lender’s consent.

Front 398

Security Interests in Real Estate: Defenses and Discharge of the Mortgage

Back 398

Because a mortgage is granted to secure an obligation, defenses in an action on the underlying obligation (e.g., failure of consideration, duress, mistake, fraud) are defenses against an action on the mortgage. A mortgagee’s right to foreclose is precluded by a discharge of the mortgage—e.g., payment of the debt secured, merger of the legal and equitable interests, or the mortgagee’s acceptance of a deed in lieu of foreclosure tendered by the mortgagor.

Front 399

Security Interests in Real Estate: Possession Before Foreclosure

Back 399

When a mortgagor defaults on his debt, the mortgagee can foreclose on the mortgage. A mortgagee may wish to take possession of the property, or begin receiving the rents from the property, before foreclosure.

Front 400

Security Interests in Real Estate: Possession Before Foreclosure: Theories of Title

Back 400

The mortgagee may have a right to take possession before foreclosure, depending on the theory the state follows. Most states follow the lien theory.

Front 401

Security Interests in Real Estate: Possession Before Foreclosure: Theories of Title: The Lien Theory

Back 401

According to the lien theory, the mortgagee is considered the HOLDER OF A SECURITY INTEREST ONLY and the mortgagor is deemed the owner of the land until foreclosure. The mortgagee may NOT have possession before foreclosure.

Front 402

Security Interests in Real Estate: Possession Before Foreclosure: Theories of Title: The Title Theory

Back 402

Under the title theory, LEGAL TITLE IS IN THE MORTGAGEE until the mortgage has been satisfied or foreclosed, and the mortgagee is entitled to possession upon demand at any time.

Front 403

Security Interests in Real Estate: Possession Before Foreclosure: Theories of Title: The Intermediate Theory

Back 403

In the few states that follow the intermediate theory, legal title is in the mortgagor until default, and upon default, LEGAL TITLE IS IN THE MORTGAGEE. The mortgagee may demand possession when a default occurs. There is little practical difference between this theory and the title theory.

Front 404

Security Interests in Real Estate: Possession Before Foreclosure: Mortgagor Consent and Abandonment

Back 404

The mortgagee may take possession if the mortgagor gives consent to do so, or if the mortgagor abandons the property.

Front 405

Security Interests in Real Estate: Possession Before Foreclosure: Risks of Mortgagee in Possession

Back 405

Most mortgagees do not wish to take possession because of the risks of liability. These risks involve the duty to account for rents, the duty to manage the property in a prudent manner, and potential tort liability for those injured on the property.

Front 406

Security Interests in Real Estate: Possession Before Foreclosure: Receiverships

Back 406

Most mortgagees attempt to intercept the rents before foreclosure by getting a receiver appointed by the court to manage the property. Courts will generally appoint receivers for rental property upon showing that:
1. Waste is occurring,
2. The value of the property is inadequate to secure the debt, and
3. The mortgagor is insolvent.

Front 407

Security Interests in Real Estate: Foreclosure

Back 407

Almost all states require foreclosure by sale, under which the property is sold to satisfy the debt in whole or part. While all states allow JUDICIAL SALE, some states allow nonjudicial sale under a POWER OF SALE (usually with respect to deeds of trust). Foreclosure sales are usually conducted by auction, and the lender is permitted to bid at the sale.

Front 408

Security Interests in Real Estate: Foreclosure: Redemption: Redemption in Equity

Back 408

At ANY TIME PRIOR TO THE FORECLOSURE SALE, the mortgagor may redeem the property by paying the amount due. If the note or mortgage contains an acceleration clause, the full balance of the note or mortgage must be paid to redeem. This right cannot be waived in the mortgage itself.

Front 409

Security Interests in Real Estate: Foreclosure: Statutory Redemption

Back 409

About half the states allow the mortgagor to redeem the property for some fixed period (e.g., six months) AFTER THE FORECLOSURE SALE has occurred.

Front 410

Security Interests in Real Estate: Foreclosure: Priorities

Back 410

A mortgagee’s priority is usually determined by the time it was placed in the property. Foreclosure does not destroy any interests senior to the interest being foreclosed. It generally destroys all junior interests, but failure to include a junior interest holder in a foreclosure action results in preservation of that party’s interest.

Front 411

Security Interests in Real Estate: Foreclosure: Priorities: Modification of Priority

Back 411

Although priority among mortgages is generally determined by chronology, this priority may be changed by:
1. The operation of the recording statute if a PRIOR MORTGAGEE FAILS TO RECORD;
2. A SUBORDINATION AGREEMENT between a senior and junior mortgagee;
3. A PURCHASE MONEY MORTGAGE;
4. The MODIFICATION OF A SENIOR MORTGAGE (junior mortgage has priority over the modification); or
5. The GRANTING OF OPTIONAL FUTURE ADVANCES by a mortgagee with notice of a junior lien (junior lien has priority over advances).

Front 412

Security Interests in Real Estate: Foreclosure: Priorities: Purchase Money Mortgages

Back 412

A purchase money mortgage (“PMM”) is a mortgage given in exchange for funds used to purchase the property. PMMs are given either to the seller as part of the purchase price or to a third-party lender. PMMs have priority over PRIOR non-PMMs, even if such mortgages or liens are recorded first. However, SUBSEQUENT mortgages or liens may defeat PMM priority by operation of the recording acts. As between two PMMs, a seller’s mortgage has priority over a third party’s. If there are two third-party PMMs, priority is determined by chronological order. Usually two PMMs have notice of the other’s existence; thus, the recording acts are of no use in determining priority.

Front 413

Security Interests in Real Estate: Foreclosure: Proceeds of Sale

Back 413

Proceeds are applied first to the expenses of the sale, attorneys’ fees, and court costs; then to the principal and accrued interest on the FORECLOSED LOAN; next to any other JUNIOR INTERESTS in the order of their priority; and finally to the MORTGAGOR.

Front 414

Security Interests in Real Estate: Foreclosure: Deficiency Judgments

Back 414

If the proceeds are insufficient to satisfy the mortgage debt, the mortgagee retains a personal cause of action against the mortgagor for the deficiency.

Front 415

Security Interests in Real Estate: Installment Land Contracts

Back 415

Many installment contracts provide for forfeiture rather than foreclosure as the vendor’s remedy for default, but courts use the following theories to avoid that harsh result:
1. Equity of Redemption
2. Restitution
3. Treat as a Mortgage
4. Waiver
5. Election of Remedies

Front 416

Security Interests in Real Estate: Installment Land Contracts: Equity of Redemption

Back 416

Several states give the contract purchaser a grace period to pay the accelerated full balance of the contract and keep the land after default.

Front 417

Security Interests in Real Estate: Installment Land Contracts: Restitution

Back 417

A number of decision, while granting forfeiture, have required the vendor to refund to the purchaser any amount by which his payments exceed the vendor’s damages.

Front 418

Security Interests in Real Estate: Installment Land Contracts: Treat as a Mortgage

Back 418

A few states treat installment contracts as mortgages, thus requiring a judicial foreclosure sale.

Front 419

Security Interests in Real Estate: Installment Land Contracts: Waiver

Back 419

Many cases hold that a vendor’s pattern of accepting late payments constitutes a waiver of the right of strict performance. To reinstate strict performance, the vendor must send the purchaser a notice of his intention to do so and must allow a reasonable time for the purchaser to make up any late payments.

Front 420

Security Interests in Real Estate: Installment Land Contracts: Election of Remedies

Back 420

The vendor must choose only one remedy (damages or specific performance) and forgo all others.

Front 421

Rights Incidental to Ownership of Land (Natural Rights): In General

Back 421

An owner of real property has the exclusive right to use and possess the surface, the airspace, and the soil of the property.

Front 422

Rights Incidental to Ownership of Land (Natural Rights): Rights to Lateral and Subjacent Support of Land: Lateral Support

Back 422

Ownership of land includes the right to have the land supported in its NATURAL STATE by adjoining land.

Front 423

Rights Incidental to Ownership of Land (Natural Rights): Rights to Lateral and Subjacent Support of Land: Lateral Support: Support of Land in Natural State

Back 423

A landowner is STRICTLY LIABLE if his excavation causes adjacent land to subside (i.e.. slip or cave in).

Front 424

Rights Incidental to Ownership of Land (Natural Rights): Rights to Lateral and Subjacent Support of Land: Lateral Support: Support of Land with Buildings

Back 424

An adjacent landowner is strictly liable for damage to land and buildings caused by excavation only if it is shown that the land would have collapsed in its natural state. Otherwise, he is liable for such damage only if his excavation was done NEGLIGENTLY.

Front 425

Rights Incidental to Ownership of Land (Natural Rights): Rights to Lateral and Subjacent Support of Land: Subjacent Support

Back 425

An underground occupant of land (e.g., a mining company) must support the surface and buildings existing on the date the subjacent estate was created. Liability for subsequently erected buildings requires NEGLIGENCE.

Front 426

Rights Incidental to Ownership of Land (Natural Rights): Water Rights

Back 426

Different rules apply to watercourses, groundwater, and surface waters.

Front 427

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Watercourses (Streams, Rivers, and Lakes)

Back 427

There are two major systems for determining allocation of water in watercourses: the riparian doctrine and the prior appropriation doctrine. A boundary line also can be affected by ACCRETION or AVULSION.

Front 428

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Watercourses (Streams, Rivers, and Lakes): Riparian Doctrine

Back 428

Under this doctrine, the water belongs to those who own the land bordering the watercourse. Riparian rights attach to all contiguous tracts held by the same owner as long as one abuts the water. Riparian owners can use water only in connection with the riparian parcel.

Front 429

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Watercourses (Streams, Rivers, and Lakes): Riparian Doctrine: Natural Flow Theory

Back 429

Under this theory, a riparian owner’s use resulting in substantial or material diminution of the water’s quantity, quality, or velocity is enjoinable.

Front 430

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Watercourses (Streams, Rivers, and Lakes): Riparian Doctrine: Reasonable Use Theory

Back 430

Under this theory, which is the most common, all riparians share the right of “reasonable use” of the water (i.e., one owner’s use is not enjoinable unless it substantially interferes with the use of other riparian owners). In determining “reasonable” use, courts balance the utility of the owner’s use against the gravity of the harm. Six factors are helpful in making this determination: alteration of flow, purpose of use, pollution, extent of use, destination of water taken, and miscellaneous conduct that may give rise to litigation.

Front 431

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Watercourses (Streams, Rivers, and Lakes): Riparian Doctrine: Natural vs. Artificial Use

Back 431

Under either theory, natural uses (human uses, e.g., consumption, gardening) prevail over artificial uses (e.g., irrigation, manufacturing).

Front 432

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Watercourses (Streams, Rivers, and Lakes): Prior Appropriation Doctrine

Back 432

Under this doctrine, individuals acquire rights by actual use. Appropriative rights are determined by priority of beneficial use. If there is a decrease in flow, priority is accorded in terms of time of appropriation. An appropriative right can be lost by abandonment.

Front 433

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Groundwater (Percolating Water)

Back 433

Four doctrines determine rights in diffuse underground water recovered through wells:
1. Absolute Ownership Doctrine
2. Reasonable Use Doctrine
3. Correlative Rights Doctrine
4. Appropriative Rights Doctrine
5. Restatement Approach

Front 434

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Groundwater (Percolating Water): Absolute Ownership

Back 434

This doctrine is followed by only a few states. The owner of overlying land can take all the water she wishes, for any purpose, including export.

Front 435

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Groundwater (Percolating Water): Reasonable Use Doctrine

Back 435

Many eastern states follow this doctrine. It is like absolute ownership, but exporting is allowed only if it does not harm other owners who have rights in the same aquifer.

Front 436

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Groundwater (Percolating Water): Correlative Rights Doctrine

Back 436

In some states, owners of overlying land own the underground water basin as joint tenants, and each is allowed a reasonable amount for his own use.

Front 437

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Groundwater (Percolating Water): Appropriative Rights Doctrine

Back 437

This doctrine is followed in many western states. Priority of use (not ownership of overlying land) is determinative.

Front 438

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Groundwater (Percolating Water): Restatement Approach

Back 438

A few states follow the Restatement Approach, under which a surface owner may pump groundwater unless it:
1. Unreasonably harms neighboring landowners,
2. Exceeds the pumper’s reasonable share, or
3. Directly and substantially affects surface waters and unreasonably harms surface water users.

Front 439

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Surface Waters

Back 439

A landowner can use surface water (i.e., water without a channel that passes over land, such as rainfall, seepage, etc.) within her boundaries for any purpose she desires. Questions on surface water usually concern liability for changing natural flow by dikes, drains, etc. Liability depends on which theory the state follows:

1. Natural Flow Theory
2. Common Enemy Theory
3. Reasonable Use Theory

Front 440

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Surface Waters: Natural Flow Theory

Back 440

Under this theory, followed by many states, owners cannot alter natural drainage patterns. This rule has been “softened” in most states to allow “reasonable changes.”

Front 441

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Surface Waters: Common Enemy Theory

Back 441

Under this theory, followed by many states, an owner can take any protective measures to get rid of the water (e.g., dikes). The rule has been modified by many courts to prohibit unnecessary damage to others’ lands.

Front 442

Rights Incidental to Ownership of Land (Natural Rights): Water Rights: Surface Waters: Reasonable Use Theory

Back 442

There is a growing trend to apply this theory, which involves balancing the utility of the use against the gravity of the harm.

Front 443

Exam Tip

Back 443

Remember that the above theories apply to redirecting surface water. A landowner can CAPTURE (e.g., by dam or in barrels) as much surface water as he wishes. Surface water can be diverted to any purpose on or off the land. Owners below have no cause of action unless the diversion was malicious.

Front 444

Rights Incidental to Ownership of Land (Natural Rights): Rights in Airspace

Back 444

The right to airspace above a parcel is not exclusive, but the owner is entitled to freedom from excessive noise.

Front 445

Rights Incidental to Ownership of Land (Natural Rights): Right to Exclude—Remedies of Possessor

Back 445

The possessor of real property has the right to exclude others. His remedies for invasions include actions for:
1. TRESPASS (land invaded by TANGIBLE physical object);
2. PRIVATE NUISANCE (land invaded by INTANGIBLES such as odors or noise);
3. CONTINUING TRESPASS (land repeatedly invaded by trespasser); and
4. EJECTMENT OR UNLAWFUL DETAINER to remove a trespasser or tenant. This action can be joined with a demand for money damages.

Front 446

Cooperatives, Condominiums, and Zoning: Cooperatives

Back 446

In a cooperative, title to the land and buildings is held by a corporation that leases individual apartments to its shareholders. Because of their economic interdependence and because the individual owners are regarded as tenants, a direct restraint on the alienation of an individual interest is valid.

Front 447

Cooperatives, Condominiums, and Zoning: Condominiums

Back 447

In a condominium, each owner owns the interior of his individual unit plus an undivided interest in the exterior and common areas. Because condominium unit ownership is treated as fee ownership, the ordinary rules against restraint on alienation apply.

Front 448

Cooperatives, Condominiums, and Zoning: Zoning

Back 448

The state may enact statutes to reasonably control the use of land for the protection of the HEALTH , SAFETY, MORALS, WELFARE of its citizens. The zoning power is based on the states police power and is limited by the Due Process and Equal Protection Clauses of the Fourteenth Amendment, and the “no taking without just compensation” clause of the Fifth Amendment. Cities and counties can exercise zoning power only if so authorized by a state enabling act. These terms should be remembered:
1. Nonconforming Use
2. Special Use Permit
3. Variance

Front 449

Cooperatives, Condominiums, and Zoning: Nonconforming Use

Back 449

A use that exists at the time of passage of a zoning act that does not conform to the statute cannot be eliminated at once. AMORTIZATION is the gradual elimination of such uses.

Front 450

Cooperatives, Condominiums, and Zoning: Special Use Permit

Back 450

A special use permit is one that must be obtained even though the zoning is proper for the intended use. It is often required for hospitals, funeral homes, drive-in businesses, etc.

Front 451

Cooperatives, Condominiums, and Zoning: Variance

Back 451

A variance is a departure from the literal restrictions of a zoning ordinance granted by administrative action.

Front 452

Exam Tip

Back 452

Zoning ordinances are generally invalid if they have no reasonable relation to public welfare, are too restrictive, are discriminatory as to a particular parcel, are beyond the grant of authority, violate due process, or are racially discriminatory.

Front 453

Cooperatives, Condominiums, and Zoning: Zoning: Unconstitutional Takings and Exactions

Back 453

A zoning ordinance may so reduce the value of real property that it constitutes a taking under the Fifth and Fourteenth Amendments. If the ordinance constitutes a taking, the local government must pay damages to the landowner equal to the value reduction. If the ordinance regulates activity that would be considered a nuisance under common law principles, it will not be a taking even if it leaves the land with no economic value.

Front 454

Cooperatives, Condominiums, and Zoning: Zoning: Unconstitutional Takings and Exactions: Denial of ALL Economic Value—Taking

Back 454

A regulation that deprives the owner of ALL economic use of his land constitutes a taking (unless the use was prohibited by nuisance or property law when the owner acquired the property).

Front 455

Cooperatives, Condominiums, and Zoning: Zoning: Unconstitutional Takings and Exactions: Denial of NEARLY ALL Economic Value—Balancing Test

Back 455

If a regulation leaves property with VERY LITTLE ECONOMIC VALUE, to determine if there was a taking the court will balance:
1. The SOCIAL GOALS of the regulation,
2. The DIMUNITION IN VALUE of the property, and
3. The owner’s REASONABLE EXPECTATIONS for use of the property.

Front 456

Cooperatives, Condominiums, and Zoning: Zoning: Unconstitutional Takings and Exactions: Unconstitutional Exactions

Back 456

Local governments often demand, in exchange for zoning approval for a new project, that the landowner give up some land for a public purpose, such as street widening. However, such demands are unconstitutional under the Fifth and Fourteenth Amendments unless the government proves:
1. The government demands are RATIONALLY CONNECTED to an additional burden the project will place on public facilities or rights (essential nexus); and
2. The dedication is reasonably related in NATURE and EXTENT to the impact of the proposed development (rough proportionality)

Front 457

Cooperatives, Condominiums, and Zoning: Zoning: Unconstitutional Takings and Exactions: Remedy

Back 457

If a regulation constitutes a taking, the government will be required either to compensate the owner for the property or to terminate the regulation and pay the owner damages for the temporary taking.